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; request a free guide on NISAs from Hargreaves Lansdown

Homeless Veterans charity auction: Cook with Angela Hartnett and Neil Borthwick at Merchants Tavern
charity appeal
Amir Khan is engaged in a broader battle than attempting to win a fight with Floyd Mayweather
boxing Exclusive: Amir Khan reveals plans to travel to Pakistan
Arts and Entertainment
Caroline Flack became the tenth winner of Strictly Come Dancing
tvReview: 'Absolutely phenomenal' Xtra Factor presenter wins Strictly Come Dancing final
Ched Evans in action for Sheffield United in 2012
footballRonnie Moore says 'he's served his time and the boy wants to play football'
Finacial products from our partners
Property search
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

    Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

    $200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

    Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

    $125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

    Sheridan Maine: Commercial Finance Manager

    Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

    Sheridan Maine: Regulatory Reporting Accountant

    Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

    Day In a Page

    Amir Khan: 'The Taliban can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'

    Amir Khan attacks the Taliban

    'They can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'
    Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

    Homeless Veterans appeal

    In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
    Could cannabis oil reverse the effects of cancer?

    Could cannabis oil reverse effects of cancer?

    As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
    The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

    The Interview movie review

    You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
    Serial mania has propelled podcasts into the cultural mainstream

    How podcasts became mainstream

    People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
    Jesus Christ has become an unlikely pin-up for hipster marketing companies

    Jesus Christ has become an unlikely pin-up

    Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
    Rosetta space mission voted most important scientific breakthrough of 2014

    A memorable year for science – if not for mice

    The most important scientific breakthroughs of 2014
    Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

    Christmas cocktails to make you merry

    Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
    5 best activity trackers

    Fitness technology: 5 best activity trackers

    Up the ante in your regimen and change the habits of a lifetime with this wearable tech
    Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

    Paul Scholes column

    It's a little-known fact, but I have played one of the seven dwarves
    Fifa's travelling circus once again steals limelight from real stars

    Fifa's travelling circus once again steals limelight from real stars

    Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
    Frank Warren column: 2014 – boxing is back and winning new fans

    Frank Warren: Boxing is back and winning new fans

    2014 proves it's now one of sport's biggest hitters again
    Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

    Jeb Bush vs Hillary Clinton

    Karen Tumulty explores the power dynamics of the two first families
    Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

    Stockholm is rivalling Silicon Valley

    The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
    Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

    Crucified Santa: Urban myth refuses to die

    The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture