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.

s.read@independent.co.uk

Sport
Laura Trott with her gold
Commonwealth GamesJust 48 hours earlier cyclist was under the care of a doctor
Life and Style
Upright, everything’s all right (to a point): remaining on one’s feet has its health benefits – though in moderation
HealthIf sitting is bad for your health, what happens when you stay on your feet for a whole month?
Arts and Entertainment
Peter Griffin holds forth in The Simpsons Family Guy crossover episode
arts + ents
News
Orville and Keith Harris. He covered up his condition by getting people to read out scripts to him
People
PROMOTED VIDEO
Sport
France striker Loic Remy
sportThe QPR striker flew to Boston earlier in the week to complete deal
Arts and Entertainment
Gal Gadot as Wonder Woman
arts + entsFilmmaker posted a picture of Israeli actress Gal Gadot on Twitter
Sport
Vincenzo Nibali rides into Paris on the final stage of the 2014 Tour de France
Tour de FranceVincenzo Nibali is first Italian winner since Marco Pantani in 1998
News
Bryan had a bracelet given to him by his late father stolen during the raid
people
Arts and Entertainment
Chris Pratt stars in Guardians of the Galaxy
arts + ents
Arts and Entertainment
Pedro Pascal gives a weird look at the camera in the blooper reel
arts + entsPrince Oberyn nearly sets himself on fire with a flaming torch
News
Danny Nickerson, 6, has received 15,000 cards and presents from well-wishers around the world
newsDanny loves to see his name on paper, so his mother put out a request for cards - it went viral
Arts and Entertainment
Zoe Saldana stars in this summer's big hope Guardians of the Galaxy
filmHollywood's summer blockbusters are no longer money-spinners
Sport
Red Bull Racing's Australian driver Daniel Ricciardo (C) celebrates with Scuderia Ferrari's Spanish driver Fernando Alonso (L) and Mercedes' British driver Lewis Hamilton
sport
Arts and Entertainment
comedy
Arts and Entertainment
Public vote: Art Everywhere poster in a bus shelter featuring John Hoyland
art
Arts and Entertainment
Judd Apatow’s make-it-up-as-you-go-along approach is ideal for comedies about stoners and slackers slouching towards adulthood
filmComedy was dominated by the romcom at its most insufferable
Sport
Tour de France competitor Bartosz Huzarski’s legs have highlighted the gruelling nature of the race, after he posted a picture on Facebook showing extremely prominent veins stretching from his feet and all the way up his legs
Commonwealth Games
Life and Style
Elle Kaye demonstrates the art of taxidermy
food + drinkFood revolution taken a step further in new ‘edible taxidermy’ class
News
A rub on the tummy sprang Casey back to life
video
Sport
Halsall broke her personal best in the 50m butterfly
Commonwealth GamesEnglish swimmer is reborn after disastrous time at London 2012
Arts and Entertainment
O'Shaughnessy pictured at the Unicorn Theatre in London
tvFiona O'Shaughnessy explains where she ends and her strange and wonderful character begins
Life and Style
Workers in Seattle are paid 100 times as much as workers in Bangladesh
fashionSeattle company lets customers create their own clothes, then click 'buy' and wait for delivery
Arts and Entertainment
Red Bastard: Where self-realisation is delivered through monstrous clowning and audience interaction
comedy
Arts and Entertainment
booksForget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks
Voices
The Express offices in the 1930s when writers (such as Orwell) were paid around £2 weekly
voicesWebsites offering your ebooks for nothing is only the latest disrespect the modern writer is subjected to, says DJ Taylor
Life and Style
A cut above: Katy Guest at The Ginger Pig
food + drinkThe Ginger Pig's hands-on approach to primary cuts
Finacial products from our partners
Property search
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

    Application Support Analyst / Junior SQL Server DBA

    £40000 - £45000 per annum: Ashdown Group: An established professional services...

    Senior Risk Manager - Banking - London - £650

    £600 - £650 per day: Orgtel: Conduct Risk Liaison Manager - Banking - London -...

    The benefits of being in Recruitment at SThree...

    £18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...

    Test Analyst - UAT - Credit Risk

    £280 - £300 per day + competitive: Orgtel: Test Analyst, Edinburgh, Credit Ris...

    Day In a Page

    A new Russian revolution: Cracks start to appear in Putin’s Kremlin power bloc

    A new Russian revolution

    Cracks start to appear in Putin’s Kremlin power bloc
    Eugene de Kock: Apartheid’s sadistic killer that his country cannot forgive

    Apartheid’s sadistic killer that his country cannot forgive

    The debate rages in South Africa over whether Eugene de Kock should ever be released from jail
    Standing my ground: If sitting is bad for your health, what happens when you stay on your feet for a whole month?

    Standing my ground

    If sitting is bad for your health, what happens when you stay on your feet for a whole month?
    Commonwealth Games 2014: Dai Greene prays for chance to rebuild after injury agony

    Greene prays for chance to rebuild after injury agony

    Welsh hurdler was World, European and Commonwealth champion, but then the injuries crept in
    Israel-Gaza conflict: Secret report helps Israelis to hide facts

    Patrick Cockburn: Secret report helps Israel to hide facts

    The slickness of Israel's spokesmen is rooted in directions set down by pollster Frank Luntz
    The man who dared to go on holiday

    The man who dared to go on holiday

    New York's mayor has taken a vacation - in a nation that has still to enforce paid leave, it caused quite a stir, reports Rupert Cornwell
    Best comedians: How the professionals go about their funny business, from Sarah Millican to Marcus Brigstocke

    Best comedians: How the professionals go about their funny business

    For all those wanting to know how stand-ups keep standing, here are some of the best moments
    The Guest List 2014: Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks

    The Guest List 2014

    Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks
    Jokes on Hollywood: 'With comedy film audiences shrinking, it’s time to move on'

    Jokes on Hollywood

    With comedy film audiences shrinking, it’s time to move on
    It's the best of British art... but not all is on display

    It's the best of British art... but not all is on display

    Voted for by the British public, the artworks on Art Everywhere posters may be the only place where they can be seen
    Critic claims 'I was the inspiration for Blanche DuBois'

    Critic claims 'I was the inspiration for Blanche DuBois'

    Blanche Marvin reveals how Tennessee Williams used her name and an off-the-cuff remark to create an iconic character
    Sometimes it's hard to be a literary novelist

    Sometimes it's hard to be a literary novelist

    Websites offering your ebooks for nothing is only the latest disrespect the modern writer is subjected to, says DJ Taylor
    Edinburgh Fringe 2014: The comedy highlights, from Bridget Christie to Jack Dee

    Edinburgh Fringe 2014

    The comedy highlights, from Bridget Christie to Jack Dee
    Dame Jenny Abramsky: 'We have to rethink. If not, museums and parks will close'

    Dame Jenny Abramsky: 'We have to rethink. If not, museums and parks will close'

    The woman stepping down as chair of the Heritage Lottery Fund is worried