Budgeting your money is a hard enough task when you have income to budget but when it comes to those on state benefits and low incomes, things can easily spiral out of control. As mounting pressure rises to put food on the table, clothe the family, and pay household bills, desperate measures are often considered by such people in order to just survive. I am not referring to the temptation of turning to illegal methods that can lead to prison sentences but the undesirable option of turning to payday loan companies that prowl like a wolf around the vulnerable ready to pounce. It may surprise some people to learn that you can get a payday loan even if you are unemployed, which is rather ironic. I have witnessed first hand experience of this on numerous occasions. The ease at which vulnerable people who have no way of repaying the money can access such loans concerns me. Combine this ‘easy access’ to cash with the pressing needs in life, results in potentially devastating situations. Many of our service users have significant debt issues that have arisen from such situations and we rely on organisations like Christians Against Poverty (CAP) to help combat the consequences.
Let me make the motive for money clear here – I am referring to NEED, not desires or wants. A major reason an increasing number of people are turning to payday loans is not in relation to getting your hands on extra cash in order to buy the latest flat screen TV, I am referring to being able to provide for your own and your families basic needs. The number of people including families in our local communities that cannot afford to eat properly is astonishing and the numbers are rising rapidly.
Payday loan adverts are everywhere. When the pressure mounts and the same misleading adverts are put before you on the TV, radio and magazines it is difficult to resist the offer of quick cash in your hand. The offer enables you to get through today but makes tomorrow event more challenging and precarious as debts begin to escalate. Once this routine is entered into it is difficult to break out of it as you continue to return for more cash based on ever increasing financial needs that quickly become a crisis. You can level responsibility entirely on the shoulders of the borrower who ‘chooses’ to inherit this lifestyle but there has to be social responsibility demonstrated by the lenders.
The Government has recently announced that payday loan lenders will face tougher regulation in the market place. The Financial Conduct Authority (FCA) will enforce lenders to conduct ‘affordability’ checks on borrowers before providing them with a loan. Other suggestions include providing borrowers with debt advice, capping or limiting interest rates and dropping products that are not in the best interests of the consumers. The FCA also wants risk warnings on adverts and marketing material, which seems to draw parallels between payday loans and smoking – both being highlighted as being bad for your health!
Bolton Councillor Nick Peel said: “The Government has finally woken up to the fact that there is a crazy situation at present. However it’s only a sticking plaster on a huge problem. We need the Government to regulate these companies so that they act in a responsible manner with rates of interest capped, as is the case in other countries.”
I sincerely hope that the Government ensures that strong regulation is introduced to the sector that acts in the best interests of the borrowers meaning that only people who can truly afford to repay the loans are able to lend such money. Regulation will hopefully point vulnerable people away from payday loan wolves and in the direction of other forms of provision that offer long-term solutions and methods of working things through, as opposed to short-term fixes, which only temporarily mask the major issues.