Simon Read: Rogue payday lenders must be closed down to protect the hard-up
Saturday 07 January 2012
Hardships are continuing for families this year. Housing charity Shelter reckons some seven million vulnerable folk have turned to expensive credit just to pay their rent or mortgages.
Borrowing to pay off other debt is a clear sign that finances are out of control. But at least the majority are buying some time to get their finances back on track by borrowing on overdrafts or credit cards. Frighteningly Shelter's research suggests around a million people have turned to payday loans, which can prove the most expensive way of borrowing of all.
As we report on page 55, experts are beginning to question the legality of elements of the payday loan industry while MPs have been leading a campaign to crack down on some of the more dodgy practices, such as rolling over loans.
The heart of the problem is the wrong people are using the loans. "A payday loan is for a short-term need or desire, not for managing long-term debt," points out John Lamidey of the Consumer Finance Association, a body which represents the payday loans industry.
He points out, rightly, that borrowing a small sum from a payday lender can help to bridge an income gap and avoid having to pay high credit card charges or unauthorised bank overdraft fees.
But the problem remains that the loans are easy to take out and, in many cases, lenders are sending texts and emails encouraging people to turn to short-term credit. This is a highly dubious practice. I've been sent the text myself and they appear not to be targeted at responsible borrowers but just anyone.
Worse, if anyone does become tempted, their details appear to be sold on to other lenders, leading to further texts and emails offering easy credit, which can only result in increased debt woes.
Indeed a Twitter campaign run this week by the debt charity Consumer Credit Counselling Service asking people to report spam loan texts yielding the alarming report from one person who claimed to get 90 texts offering loans on Christmas Day alone!
The net result of the texts is likely to be that at-risk people, who already have a scary debt problem, are the ones who will respond, clutching at the disastrous straw of cash that may give them a few days' grace, but turn their money woes into an even bigger problem.
Steve Perry, author of the book When Payday Loans Go Wrong, says: "Lenders do not care about how or why people want a loan, nor if they can repay it, nor do they want people to borrow just the once as there is no real profit in it."
He speaks from bitter experience, after ending up being caught in a cycle of taking out new loans every month to pay his bills and pay off existing loans.
The Consumer Finance Association tries to position payday lenders as responsible companies which check their customers can afford the loans. The nine members of the Association may be, but what about the hundreds of rogue lenders pushing their expensive deals onto vulnerable people?
For that reason, and not for the first time, I call for an end to these firms being allowed to add to people's money misery. The Office of Fair Trading should speed up its review of the sector and close down any firms which break the rules.
For starters they could look at Steve Perry's website at saynotopaydayloans.co.uk where there's plenty of evidence of firms that appear to be operating outside the law.
But our lawmakers should also act quickly to outlaw repeat borrowing or the rolling over of loans. Let the payday lenders make their profits, but not from people who can't afford their expensive wares.
There's little doubt that stock markets this year will be as volatile as last. Those who can't cope with fluctuations should think about moving savings to a safer home, while those sitting on a loss should consider selling up and finding fresh opportunities.
I suggested that last week to a fellow football player. He had punted a few mining shares a year ago, almost all of which have flopped. My advice to him was take what's left and find a new investment. His response? "I can't afford to. I'll hang on until the shares recover."
It's not the first time I've heard that sentiment and it won't be the last. But it shows a lack of understanding of how shares are valued, particularly speculative ones. To put it simply, the price is only how much someone is prepared to pay.
If a mining company strikes gold, people will pay more for its shares. If there's little prospect of good news, the shares will be worthless. Successful investors are the gamblers who learn a lesson from losing, rather than simply relying on hope. Cutting losses is an important part of any investment strategy.
Sales of the tablet are set to fall again, say analysts
Trend which requires crisps, a fork and a strong stomach is sweeping Mexico's streets
George Lucas criticises the major Hollywood film studios
Does Chris Grayling realise what a vague concept he is dealing with?
Parties threaten resort's image as a family destination
Mark Dampier: Woodford’s young companies could be the stars of the future
10 tips for taking out a personal loan
Ticking time bomb: Interest rate rises are coming, so start preparing now
Weekly Money: Round-up of the personal finance stories you may have missed 13-17 October
The 10 Best money-saving sites
- 1 Jack the Ripper: Scientist who claims to have identified notorious killer has 'made serious DNA error'
- 2 Banksy arrest hoax: Internet duped by fake report claiming street artist's identity has been revealed
- 3 Are you ready for Crazy Doritos, the red-hot snack food craze sweeping Mexico’s streets?
- 4 Drink alcohol and eat meat to improve male fertility - but cut down on coffee, studies suggest
- 5 Former East 17 frontman Brian Harvey turns up at Downing Street and 'demands to speak to Prime Minister'
Cameron is warned 'no possibility' of UK reducing immigration and that bid to bring in quota on migrant workers would be illegal
Residents should throw a street party and mix with immigrant neighbours, councils told
Russell Brand threatened with arrest after filming outside Fox News headquarters
Amal Alamuddin calls for the return of the Elgin Marbles from Britain: 'Injustice has persisted for too long'
London bus driver 'kicks gay couple off for kissing'
Lord Freud: Tory welfare minister apologises after saying disabled people are 'not worth’ the minimum wage
iJobs Money & Business
£18 - 23k + Benefits: Guru Careers: We are seeking a Customer Service Executiv...
£60 - 65k + Benefits: Guru Careers: We are seeking a ASP.NET Web Developer / ....
£60,000 - £80,000: Saxton Leigh: Our client is an leading Asset Manager based...
£27000 - £32000 Per Annum: Clearwater People Solutions Ltd: Our large charity ...
Day In a Page
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village