There was a small victory this week in our continuing campaign to control the actions of unscrupulous payday lenders.
Business minister Norman Land revealed that four trade associations, representing 90 per cent of the payday loan industry, have agreed to improve the way they treat customers.
Crucially, they've agreed to freeze charges and interest for those borrowers who have got into financial difficulty. This is essential. It's the practice of charging interest upon interest and outrageous, late-payment fees that force desperate people into an out-of-control debt spiral.
I've spoken to several people who have borrowed £200 or so but suddenly been presented with demands for £1,000 or more when they've failed to repay the amount on time.
Late-payment charges are fair enough, but they must be at a reasonable level and not so high that they triple or quadruple the original amount borrowed, leaving folk with little chance of being able to afford to repay the debt.
The firms that adopt such unscrupulous tactics seem to be those that travel close to breaking credit laws while making as much profit as they can as quickly as they can. Because of the way the current regulatory system is set up, they know they've got up to two years before the Office of Fair Trading can investigate and shut them down.
So I was pleased to see that the Business minister intends to get tough with the dodgy firms. "I want to make sure that the industry can self-regulate effectively to drive out rogue companies," Norman Lamb said on Thursday.
The payday lenders that have signed up to the new codes of practice – which they've agreed to introduce by 25 July – are members of the Consumer Finance Association, the Finance & Leasing Association, the British Cheque & Credit Association and the Consumer Credit Trade Association.
They put out a statement claiming they were looking forward to maintaining "high standards in the short-term credit market". Not all the members of the trade bodies have acted reasonably in the past, in my experience, but I'm prepared to give them another chance to clean up their acts.
But they can rest assured that we will carry on naming and shaming any firms that continue to be unreasonable with borrowers who get into trouble after 25 July.
One of the problems with self-regulation is that it seldom works and I suspect that the upcoming report from the Office of Fair Trading into the payday loan industry will recommend tighter regulation of the firms. In the meantime there must be real punishment for any companies that don't treat borrowers fairly and decently.
The problem is a growing one. In the first three months of this year the charity National Debtline received 4,725 calls for help with payday loans, an increase of 58 per cent over the previous quarter and 133 per cent higher then the same three months in 2011.
For that reason lenders must be subject to greater scrutiny and be seen to offer more transparent charges and have more reasonable collections policies. We mustn't stop until we do drive out all the rogue operators.
Post offices have traditionally been used for banking and saving but a long-standing arrangement with the Government's savings institution is coming to an end. From 27 July, National Savings & Investment will no longer offer its savings accounts through the Post Office network.
Those who cherish their National Savings passbook will see it scrapped and their account moved online or closed. Those with long memories will recall the same thing happened to Girobank which was set up by the Post Office in the 1960s. It was the first to offer free banking, which is back in the news this week (see page 55). But after it was bought by the Alliance & Leicester – now part of Santander – the banking services were withdrawn from post offices.
With the network now separate from Royal Mail and set to be sold soon, it was interesting to see a proposal from Consumer Focus on Thursday for credit union services to be offered through post offices. The thinking is that they would provide a long-term alternative to high street banks, especially for people on low incomes.
The thought has a lot of merit. Well-run credit unions do a lot to help the financially-excluded and can – crucially – help hard-up people avoid falling into the clutches of the high-cost payday lenders.
The Post Office gave a guarded welcome to the proposal but if credit union services were offered through the network, it could help turn them into a credible rival for the high street banks. And that would be good news for consumers.