My article in this week’s Cornish Guardian will focus on payday loans. It will be as follows:
With so many people struggling to make ends meet, I have always found it distasteful that numerous firms have been able to make vast profits by offering short-term payday loans at extremely high levels of interest.
It is therefore great news that the new Financial Conduct Authority (FCA) has forced Wonga to write off £220m of loans to customers.
I understand that loans to 330,000 people were cancelled in their entirety, because the FCA found the “lender” – accused by some MPs of “legal loan sharking” – had neglected to even check whether people could afford the repayments. A further 45,000 customers will have interest and other punitive charges reduced.
I have a great deal of sympathy for those families and individuals, who have found themselves in difficulties after taking payday loans. Some have even had their debts sold onto third parties like commodities.
But I have noting but contempt for firms such as Wonga – which has charged “annualised interest rates of up to 5,853% a year” – and intensified the problems of so many people.
I would personally like to see legislation to simply outlaw irresponsible lending, though I do welcome that something is being done through the FCA.
The FCA’s Clive Adamson has said that its recent action against Wonga should “put the rest of the industry on notice” and that “some firms still have a way to go to meet our expectations.” But surely the FCA needs to be even more active in scrutinising the activities of such firms.
Wonga may be the “biggest online” payday lender but there are around 90 other such lenders, which are still active and, according to experts, also failing to carry out appropriate tests on the affordability of their loans.
Central government simply must take greater actions to combat the activities of payday loan firms.
And it also has a responsibility to repair a society in which it has allowed such “legal loan sharking” to flourish, because of its austerity measures, welfare cuts and its failure to regulate the financial services sector.