Short term payday loans and Bishops: All Bark and no Bite

It seems that after a couple of years of controversy and criticism from every corner, finally the promised restrictions and codes of conduct have been out lined for the payday lenders. Some of the larger bones of contention have now been addressed. Interestingly these long sought after changes manage to become a reality during the promotion of Justin Welby to Arch Bishop of Canterbury. Justin Welby also has the full backing of his successor as Bishop of Durham, Paul Butler. Not only that but he is a member of the all-powerful Parliamentary Banking Commission and with the Crossbencher Lady Howe in hand, he is sending ripples out in every direction. The aroma of political campaigning fills the autumn air.

So as the dog fight continues with bishops, Lords, and Liberals gnashing their teeth, we can’t help but wonder where all these promises from our Arch Bishop have gone. Where are these regulations? The government and House of Lords were nearly defeated by a Labour peer on an amendment on this issue. It must also be said that out of the three votes not one of the Bishops voted for the government. But let’s not dismiss these babbling politicians for the while. A ‘Significant Step’ has come to pass. There is a new code, and it is now completely implemented. Payday lenders are expected to do business keeping within the confines of the code, and they have been given a deadline within which to comply. The code was created by the CFA (Consumer Finance Association), which represents the payday industry. Three other associations were also a part of the creation of the code. The BCCA, the Consumer Credit Trade Association and the Finance and Leasing Association.

Some of the code:

  • A limit on the rollover of a loan to a maximum of three times
  • When a customer has difficulties paying back a loan, the interest must be automatically frozen
  • Customers should be given a minimum ‘breathing’ space of 30 days to get their affairs in order and make a plan to repay the loan.

Russell Hambin-Boone, chief executive of the CFA says, “While this is a significant step forward for the responsible members of the payday industry, it is far from the end of the journey.”

But here is the kicker. After all of this finger pointing at the payday industry for the devastation that it has allegedly wrecked across the land, not only does the government and the Holy Reverends leave the job of making the rules to, in essence, the lenders themselves, or at least, their representatives, this code is voluntary.

“This is an industry run by cowboys on the fringes of legality.” Says Lord Mitchell to peers.  An official study in 2010 said that payday covered a gap in the financial services of the economy. If this is so, then give the cowboys some official stamps, an imposing building and lots of little rules and regulations, and put them next to the banks, building societies and credit unions.