There have always been shady money lenders, loan sharks and gangsters ready to lend money to the vulnerable and the desperate. In 21st century Britain, these people are known by names such as WONGA, Quickquid and Pounds to Pocket: businesses which are part of the burgeoning payday lending industry, estimated to be worth around £2 billion annually.
Fortunately the government would now appear to be responding to pressure from debt charities such as Stepchange and Citizens Advice Bureau as well as newspapers like the Independent. They have accused payday lenders of a catalogue of sharp practice, verging on the criminal. SKY News recently highlighted some of these activities such as:
· Failure to carry out proper affordability checks before lending or rolling loans over
· Extortionate penalties for late payments
· Failure to explain adequately how payments will be collected
· Acting aggressively to claw back debts
The Mirror recently highlighted an extreme case: “After pocketing just £150 from a payday lender, a borrower found out the hard way how the rip-off fees can mount up horrendously. The customer’s debt rocketed to £15,500 in two years, an increase of 10,000%.
Appalled debt charity StepChange, which revealed the case said it highlights how people who do not repay loans on time, and who are already in desperate financial trouble, can be hit with extortionate charges and interest rates.
In another damning probe, Citizens Advice has found payday firms lending at sky-high rates to under-18s, the mentally ill, and people who are drunk.”
Today at a Government-led summit including the regulators and campaigners, the payday lending businesses will for the first time be asked to explain themselves. Part of the agenda will be to discuss whether the new regulator, the Financial Conduct Authority, has sufficient powers.
Last week the Office of Fair Trading referred the payday lending industry for investigation by the Competition Commission. Its report earlier in the year condemned the industry for, “widespread irresponsible lending.”
It is good to see that some Christians have been speaking up about the scandal of payday lending. The Bible calls this kind of activity ‘usury’ which Wikipedia describes as “the practice of making unethical or immoral monetary loans......a loan may be considered ‘usurious’ because of excessive or abusive interest rates”.
The Bible sanctions usury (lending with interest), but disallows it when it comes to the poor. The Book of Exodus is clear about usury: “If you lend money to one of my people among you who is needy, do not treat it like a business deal; charge no interest. If you take your neighbour’s cloak as a pledge, return it by sunset, because that cloak is the only covering your neighbour has. What else can they sleep in? When they cry out to me, I will hear, for I am compassionate.
When it comes to the poor, we can lend to them without interest and even better we can give to them. My God is compassionate, and desires us to be compassionate toward others.
Payday lenders must get their act together or be shut down.