Simon Read: We must continue to keep a close eye on the high-cost lenders


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.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at

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

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

    Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

    £50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

    Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

    £13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

    Ashdown Group: Training Programme Manager - City, London

    £40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

    Day In a Page

    Where the spooks get their coffee fix: The busiest Starbucks in the US is also the most secretive

    The secret CIA Starbucks

    The coffee shop is deep inside the agency's forested Virginia compound
    Revealed: How the Establishment closed ranks over fallout from Loch Ness Monster 'sighting'

    How the Establishment closed ranks over fallout from Nessie 'sighting'

    The Natural History Museum's chief scientist was dismissed for declaring he had found the monster
    One million Britons using food banks, according to Trussell Trust

    One million Britons using food banks

    Huge surge in number of families dependent on emergency food aid
    Excavation at Italian cafe to fix rising damp unearths 2,500 years of history in 3,000 amazing objects

    2,500 years of history in 3,000 amazing objects

    Excavation at Italian cafe to fix rising damp unearths trove
    The Hubble Space Telescope's amazing journey, 25 years on

    The Hubble Space Telescope's amazing journey 25 years on

    The space telescope was seen as a costly flop on its first release
    Did Conservative peer Lord Ashcroft quit the House of Lords to become a non-dom?

    Did Lord Ashcroft quit the House of Lords to become a non-dom?

    A document seen by The Independent shows that a week after he resigned from the Lords he sold 350,000 shares in an American company - netting him $11.2m
    Apple's ethnic emojis are being used to make racist comments on social media

    Ethnic emojis used in racist comments

    They were intended to promote harmony, but have achieved the opposite
    Sir Kenneth Branagh interview: 'My bones are in the theatre'

    Sir Kenneth Branagh: 'My bones are in the theatre'

    The actor-turned-director’s new company will stage five plays from October – including works by Shakespeare and John Osborne
    The sloth is now the face (and furry body) of three big advertising campaigns

    The sloth is the face of three ad campaigns

    Priya Elan discovers why slow and sleepy wins the race for brands in need of a new image
    How to run a restaurant: As two newbies discovered, there's more to it than good food

    How to run a restaurant

    As two newbies discovered, there's more to it than good food
    Record Store Day: Remembering an era when buying and selling discs were labours of love

    Record Store Day: The vinyl countdown

    For Lois Pryce, working in a record shop was a dream job - until the bean counters ruined it
    Usher, Mary J Blige and to give free concert as part of the Global Poverty Project

    Mary J Blige and to give free concert

    The concert in Washington is part of the Global Citizen project, which aims to encourage young people to donate to charity
    10 best tote bags

    Accessorise with a stylish shopper this spring: 10 best tote bags

    We find carriers with room for all your essentials (and a bit more)
    Paul Scholes column: I hear Manchester City are closing on Pep Guardiola for next summer – but I'd also love to see Jürgen Klopp managing in England

    Paul Scholes column

    I hear Manchester City are closing on Pep Guardiola for next summer – but I'd also love to see Jürgen Klopp managing in England
    Jessica Ennis-Hill: 'I just want to give it my best shot'

    Jessica Ennis-Hill: 'I just want to give it my best shot'

    The heptathlete has gone from the toast of the nation to being a sleep-deprived mum - but she’s ready to compete again. She just doesn't know how well she'll do...