For those with no need of them, the very concept of payday loans is intrinsically suspect. For many others, though, someone who offers a few hundred pounds of credit, up front, in cash, against an expected pay slip or benefits transfer, provides nothing less than a lifeline. The trouble is that such loans can also plunge already poor people ever deeper into debt.
According to the debt charity, StepChange, 36,000 people sought its advice last year after running into difficulties with payday loans, almost twice as many as in 2011. And only the least observant will not have noted the number of outlets offering fast cash that have sprung up on our high streets. But have the money shops multiplied because of soaring numbers excluded from conventional credit, or does the big rise in those seeking such loans reflect their greater availability – and perhaps undue laxness in regulation? It may be a bit of both.
Not everything to do with payday loans is black and white. Those living far beyond their means are too readily lumped together with those facing a sudden expense for whom a payday loan may be a better option than an unofficial loan shark. The unpalatable facts are that this country has more people in low-paid work than is often appreciated. Conventional banks cannot provide credit to everyone, regardless of ability to repay, and those seen as a worse risk will always face higher interest rates.
There is certainly room for better provision of basic banking services, including credit, to those on low incomes. Credit unions deserve more encouragement, and the law needs to be tougher on lenders who set extortionate rates and use threats to extract payment. The balance between borrower and lender will never be perfect, but it should be improved.