Payday loans defended by new consumer champion

Head of a City watchdog, Sue Lewis, compares taking a high-interest loan with dining out on her credit card

The UK's newest consumer champion has unmasked herself as a "surprising" cheerleader for the contentious payday loan industry. Sue Lewis, the new chair of a City watchdog, thinks the high-cost loans have been "demonised" at the expense of other problems in the credit market.

In an interview with The Independent on Sunday, Ms Lewis hit out at the "middle-class value judgements" that she thinks get made about people seeking payday loans, which charge ruinous rates of interest. She sees no difference between putting £50 for a meal out on her credit card and people borrowing the same amount from a payday lender for a night out. "No one would make a value judgement about whether I was paying that back at the end of the month or not."

Ms Lewis, 60, who will serve a three-year term at the head of the Financial Services Consumer Panel, called payday loans "a good product" that people "clearly want", acknowledging: "You may be surprised by my view on payday lending."

Ed Miliband recently became the latest politician to declare war on payday lending companies, warning that a Labour government would hit them with higher taxes. The Archbishop of Canterbury has joined in, vowing to put companies such as Wonga, one of the most prominent, out of business.

Ms Lewis said she was no apologist, admitting there were problems. But she thinks problems are equally bad at more reputable financial institutions, such as high street banks, which also charge sky-high interest rates.

"A lot of the industry has very, very bad practices [such as] rollovers and continuous payment authorities [regular, automatic payments]. All those things have got a lot of people into trouble very quickly. But I think the market has been really demonised. Actually, things that are just as bad go on in banks or credit cards, such as having your credit card limit increased, or the bank letting you slip into an overdraft and charging you."

Although payday lenders are braced for tougher regulation when they come under the aegis of the Financial Conduct Authority next spring, Ms Lewis cautioned against coming down too heavily on the industry. "I don't think the solution is to close the market down in effect by over-regulating it. I think the solution is to really clean it up, so that the providers left in it are very good. Hopefully the prices will drop and there will be more competition." She does not think capping the cost of credit is a good idea. "The problem with a price cap is it becomes the price. The price rises to the cap."

Her opinions are likely to prove controversial. Consumer campaigners such as Martin Lewis (no relation), who runs the popular MoneySavingExpert site, believe the industry preys on Britain's "financially illiterate" society.

"It is a hideous industry," he said. "Many [companies] are near morally criminal in my view." He thinks competition doesn't work and is a big believer in "more interventionist policy" to protect consumers.

A recent Which? report found that 1 million families are forced to take out payday loans every month to cope with the rising cost of living; nearly 400,000 need the money for essentials such as food and fuel.

Ms Lewis said it was wrong if people needed the money to eat and that no financial institution should lend money to people who can't afford to pay it back. "If people are borrowing to eat, that's a social problem that no amount of regulation can fix."

She will meet her fellow Consumer Panel members next week to set the body's priorities. She would like these to include tackling the "cross subsidies" charged by banks, which means that people racking up overdraft charges pay for those who bank for free by keeping their accounts in credit. She would also like to see clearer communications from banks with their consumers.

"One of my big passions is the industry talking to consumers in a language that they understand. That is the genius of the Wonga message. Straight-talking money. How much do you want? How long do you want it? That is the whole story. And it's quite attractive.

" There's nothing to stop financial services communicating in that way to customers, but actually it's become a sort of a nuclear proliferation. More pages of terms and conditions so customers buy or are sold the wrong thing, so they make a claim, so there are more pages of terms and conditions and the whole thing just escalates."

She added: "I think there needs to be an arms amnesty here. We need to take a step back and say, 'Actually, what would really be the best way for consumers to be served about the information they get about products?'"

Ultimately, she would like to see "banks treating their customers better". "It's kind of obvious to the normal person on the street what that means," she said.

Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Trainee Consultant - Surrey/ South West London

    £22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

    Ashdown Group: Trainee Consultant - Surrey / South West London

    £22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

    Recruitment Genius: Claims Administrator

    £16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

    Recruitment Genius: Senior SEO Executive

    £24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

    Day In a Page

    Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

    Fishing is on Nigel Farage's mind

    Ukip leader casts a line to the disaffected
    Who is bombing whom in the Middle East? It's amazing they don't all hit each other

    Who is bombing whom in the Middle East?

    Robert Fisk untangles the countries and factions
    China's influence on fashion: At the top of the game both creatively and commercially

    China's influence on fashion

    At the top of the game both creatively and commercially
    Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

    The man known as GOD has a reputation for getting the job done

    Lord O'Donnell's three principles of rule
    Rainbow shades: It's all bright on the night

    Rainbow shades

    It's all bright on the night
    'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

    Bread from heaven

    Dutch survivors thank RAF for World War II drop that saved millions
    Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

    How 'the Axe' helped Labour

    UK will be 'run for the wealthy and powerful' if Tories retain power
    Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

    The price to be paid for challenging the rule of extremists

    A revolution now 'consuming its own children'
    Welcome to the world of Megagames

    Welcome to the world of Megagames

    300 players take part in Watch the Skies! board game in London
    'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

    Charlotte Gainsbourg on 'Nymphomaniac'

    Starring in one of the most explicit films ever
    Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

    Robert Fisk in Abu Dhabi

    The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
    Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

    Vince Cable exclusive interview

    Charging fees for employment tribunals was 'a very bad move'
    Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

    Iwan Rheon is returning to his Welsh roots

    Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
    Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

    It's time for my close-up

    Meet the man who films great whites for a living
    Increasing numbers of homeless people in America keep their mobile phones on the streets

    Homeless people keep mobile phones

    A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before