{"id":2004,"date":"2013-11-04T03:51:07","date_gmt":"2013-11-04T03:51:07","guid":{"rendered":"https:\/\/charisma.local\/charisma2023\/char1smaSSL\/?post_type=finance&p=2004"},"modified":"2013-11-04T03:53:18","modified_gmt":"2013-11-04T03:53:18","slug":"politicians-go-wild-in-wongaland-but-there-are-bigger-fish-to-fry","status":"publish","type":"finance","link":"https:\/\/www.journalofculturaleconomy.org\/charisma\/finance\/politicians-go-wild-in-wongaland-but-there-are-bigger-fish-to-fry","title":{"rendered":"Politicians go wild in Wongaland, but there are bigger fish to fry"},"content":{"rendered":"

This article was originally published at\u00a0The Conversation<\/a>\u00a0(see full acknowledgements below).\u00a0<\/em><\/p>\n

October was a particularly good month for the spectacle of politicians, policymakers and their ancillary retinue of experts getting all hot and bothered about the buoyant payday loan industry.<\/p>\n

We saw the Financial Conduct Authority\u2019s consultation paper on regulating the consumer credit market<\/a>, Ed Miliband\u2019s pledge to introduce a special tax on lenders<\/a>, and a cross-party group of MPs, together with consumer rights and anti-poverty campaigners, launching a \u201cCharter to Stop the Payday Loan Rip-Off<\/a>\u201d.<\/p>\n

Amidst this fanfare, \u201cpoor outcomes\u201d, \u201cirresponsible lending\u201d and \u201charming consumers\u201d are only some of the choice phrases used to vilify the industry.<\/p>\n

Of course, elite anxiety about dodgy lending is nothing new. Right back to medieval times, the religious principle of usury prohibited the exploitation of another\u2019s need through lending at interest. Later, in the 18th and 19th centuries, the greedy figure of the pawnbroker and the spectre of the industrial poor forced to pledge their meagre possessions were grist to the mill of novelists and pulpit preachers.<\/p>\n

Clearly, as in previous times, there is quite a bit of political opportunism at work here in singling out these \u201cbankers to the poor\u201d for public attention.<\/p>\n

Loaded phrasing<\/strong><\/p>\n

In the FCA\u2019s consultation paper, for example, the very term \u201cpayday lending\u201d is rejected and replaced by the far more loaded phrase \u201chigh-cost short-term credit\u201d. The manipulation of meaning becomes all too clear when high-cost borrowing from banks and mainstream financial institutions is deliberately excluded from such a definition.<\/p>\n

One doesn\u2019t have to be a fan of the payday industry to appreciate their argument that bank current account overdraft fees<\/a> and late-payment penalties on credit cards can produce effective rates for borrowers on a par with anything charged by Wonga and their ilk<\/a>. Yet, strangely, these don\u2019t fit the definition.<\/p>\n

The general thrust of the proposed regulations is all about protecting individuals from themselves \u2013 not all individuals, of course, just those \u201chigh risk\u201d (read: poor) borrowers who tend to have recourse to this kind of credit.<\/p>\n

The paper ostensibly presents the case that such individuals cannot be trusted to know their own needs and lenders must be directed to decide how much they can be given. Not that, of course, such lenders can be trusted: affordability criteria are suggested that dictate how much can be borrowed and limits proposed on how many times loans can be rolled over.<\/p>\n

Given a political context that supposedly lauds the market, this approach appears deeply sceptical of the capacity of markets to promote individual interest. But, of course, these are not perceived to be normal consumers.<\/p>\n

Poor targets<\/strong><\/p>\n

Taking a step back a moment, it\u2019s important to note that the payday loan industry is not being targeted on its own here. In fact, lots of practices associated with poor working-class consumers have been targeted in recent years. For example, we have seen the banishment of smoking from public spaces, initiatives for alcohol minimum pricing and government threats to regulate, or even tax, processed foods and fizzy drinks.<\/p>\n

This suggests a set of authorities who find the lifestyles of the lower orders repugnant and would seek to save these wretches from their unhealthy and undesirable habits. Here, denial and restriction are prioritised over education and awareness. It is to this stigmatised rank that the figure of the payday lender is added.<\/p>\n

Now, let me be clear. While I may be sceptical of the motivations of our policymakers in regulating the payday lenders, I exude no love for the industry\u2019s grasping cynicism in making money from those in poverty.<\/p>\n

Yet, one should recognise that the industry continues to be successful for a reason: it\u2019s quick, easy and convenient to get relatively small amounts of money at short notice. Furthermore, one can do this for short periods of time that reflect the precarious and \u201cof-the-moment\u201d household finances<\/a> of Britain\u2019s welfare claimants and working poor.<\/p>\n

Thriving in poverty<\/strong><\/p>\n

Targeting payday lending practices rather misses the point of why poor people might have to resort to these forms of borrowing in the first place. It\u2019s a little bit like pushing someone off a cliff and blaming gravity for the fall.<\/p>\n

The reason the industry thrives is because poverty \u2013 the natural constituency of the payday lender \u2013 is a burgeoning phenomenon. The remarkable success of the industry is not really down to clever marketing and convenient online \u201csliders\u201d<\/a>. On the contrary, it lies with unemployment, the proliferation of low-paid service sector jobs, welfare cuts, high inflation and stagnant wages which serve up more and more needy customers onto the platters of the payday industry.<\/p>\n

Perhaps it is worth casting our minds back to the past to note the rapid decline, since reversed, in the numbers of licensed pawnbrokers that occurred in Britain over much of 20th century. This was not accomplished by interest rate caps, stricter borrowing rules or limiting opening hours; on the contrary, it occurred because the material reasons people had to pledge and borrow were substantially removed. Vibrant economic growth, better-paying jobs and a universal welfare state did more to limit the traditional pawnbroker than \u201cconcerned\u201d regulators ever did. Perhaps it\u2019s time we revisited that lesson.<\/p>\n

Acknowledgements<\/h4>\n

\"conversation\"<\/a><\/p>\n

This article was originally published at\u00a0The Conversation<\/a>, where you\u00a0can read the\u00a0original article<\/a>. Article and image licensed under Creative Commons Agreements. Image by Andos_pics<\/a>.<\/em><\/p>\n

Donncha Marron does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.<\/em><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Donncha Marron on the spectacle of politicians and experts targeting payday lending, while ignoring the role of poverty and social and economic precarity Read More<\/a><\/p>","protected":false},"author":107,"featured_media":2007,"menu_order":0,"comment_status":"open","ping_status":"open","template":"","meta":{"_acf_changed":false,"footnotes":""},"categories":[1,7],"tags":[282,401,752,751,750,653,749,636,654,698,635],"class_list":["post-2004","finance","type-finance","status-publish","has-post-thumbnail","hentry","category-all","category-writing","tag-credit","tag-debt","tag-fca","tag-financial-conduct-authority","tag-irresponsible-lending","tag-lending","tag-payday","tag-payday-lending","tag-payday-loans","tag-poverty","tag-wonga"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.journalofculturaleconomy.org\/charisma\/wp-json\/wp\/v2\/finance\/2004","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.journalofculturaleconomy.org\/charisma\/wp-json\/wp\/v2\/finance"}],"about":[{"href":"https:\/\/www.journalofculturaleconomy.org\/charisma\/wp-json\/wp\/v2\/types\/finance"}],"author":[{"embeddable":true,"href":"https:\/\/www.journalofculturaleconomy.org\/charisma\/wp-json\/wp\/v2\/users\/107"}],"replies":[{"embeddable":true,"href":"https:\/\/www.journalofculturaleconomy.org\/charisma\/wp-json\/wp\/v2\/comments?post=2004"}],"version-history":[{"count":0,"href":"https:\/\/www.journalofculturaleconomy.org\/charisma\/wp-json\/wp\/v2\/finance\/2004\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.journalofculturaleconomy.org\/charisma\/wp-json\/wp\/v2\/media\/2007"}],"wp:attachment":[{"href":"https:\/\/www.journalofculturaleconomy.org\/charisma\/wp-json\/wp\/v2\/media?parent=2004"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.journalofculturaleconomy.org\/charisma\/wp-json\/wp\/v2\/categories?post=2004"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.journalofculturaleconomy.org\/charisma\/wp-json\/wp\/v2\/tags?post=2004"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}