If the cap fits, wear it.

I couldn’t believe the interview given by the Chief Executive of the Consumer Finance Association today. He claimed that the new interest rate cap was the ‘cherry on an already heavily iced cake.’
Does he not realize that the only reason the cake needed a cherry on top, or that the cake had to be iced at all, was because his members didn’t react quickly enough to the clear signs from the regulator that payday lenders would need to get their collective acts together, and do it quickly.
We need to have Payday loans, we’re told, mainly by those who are selling them, because they make cash available to people who have no other means of accessing it. And they say it as if they’re carrying out some sort of social service. It’s not. It’s a money-making machine, and one that preys on the weak and vulnerable in our society at a time when our mainstream bankers have given up on doing anything that doesn’t have ‘bolstering up our balance sheet’ as the top priority.
The payday loans apologists tell us that they offer a facility for those who need short term access to cash, and that the Annual Percentage Rates that are quoted aren’t accurate because they only apply if the money is borrowed for a full year and their loans are all arranged over shorter timescales. That may be the case initially, but much of the evidence suggests that many of these loans were being rolled-over at least once and sometimes more often. This had the effect of making them look more like a ‘regular’ loan, and the quoted APR will start to be not too far from the truth.
Of course there are lots of people need access to money, and that access, where it is justified, should be made available by low cost loans offered by our Credit Union Network. Much more should be made of the network of Credit Unions that run the length and breadth of the country. They have, in the past, been hampered by restrictive growth, membership and advertising rules but they engender a level of trust these days that most mainstream bank can only dream of.
And the banks should be forced to lend. That is one of their main purposes and we are at least part-owners of many of them today so they should be put to work helping us.

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