The Guardian newspaper today reports on the new regulatory system which has limited the worst excesses of the short-term lending market in the UK since the summer of 2014. Following high profile condemnation by the Archbishop of Canterbury in 2013 and some intensive campaigning by Citizens Advice and many others, new regulations have forced 14,000 lenders out of business and led to heavy losses by some of the big names.
The Consumer Finance Association claims that things are now very different from a few years ago, but the article quotes many examples of a continuing ‘trail of misery’. Complaints to the Financial Ombudsman have doubled since last year and there are still high cost alternatives such as ‘log-book loans’ and doorstep lending (often by illegal ‘loan sharks’).
Carl Packman, an industry expert at Toynbee Hall, says some people have just stopped borrowing and gone into deeper arrears on rent and utility bills instead. This is not a case of the rise and fall of payday lenders, he says: ‘It’s the rise, a hiccup, and probably another rise to come.’
There is still much for the credit union movement to do in encouraging efficient money management and affordable borrowing before crisis point is reached.