Alex Britton: Payday loans that cost country dear
THERE are a few things that aren't all that surprising when they are announced.
From announcements of troubled stores closing through to flood warnings after a heavy dose of rain, these things may worry, but they don't shock.
And the suggestion this week that some payday loan companies have been lending "irresponsibly" really only confirms what most of us thought when the number of companies offering quick cash boomed a couple of years ago.
The Office of Fair Trading's announcement was certainly worrying, but hardly shocking.
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But perhaps the most worrying aspect of it all was that it has taken so long for action to be taken against these companies.
I think the most shocking aspect of the announcement was that the payday loan sector is worth £2 billion, which is almost as eye-watering as the four-figure levels of interest that some of these lenders charge.
Their claim is that the money they lend is intended as a way of bridging over money until the next payday, hence the name. But the reality is far from that.
Half of the payday loan companies' revenue comes from rolled-over debts, which are accruing more and more interest, plunging people further in to the red and making it increasingly difficult to escape.
The top 50 payday lenders now have 12 weeks to get their houses in order and change the way they conduct their business otherwise they will lose their licences.
The main problem seems to be that some companies have been remiss in not checking if the customers can afford to have the loan and attempting to collect the debt aggressively if they cannot pay up.
And yet, shutting down payday lenders may not exactly be the best solution either. It appears these lenders are being used by people because they have exhausted every other option for credit.
And, as such, we should be looking at lending more generally – promoting the idea of local credit unions over legal loan sharks.
But most importantly, we need to be looking at education. For many, it's much easier to get a payday loan than it is to save, and this is causing problems.
To some extent, we are quite financially illiterate as a nation and many go through their lives saddled with debt. It's a ruinous problem that will only get worse.
Strides are being taken to look at what financial education children can be given at school to make sure that problems of budgeting are a thing of the past. But there will be a generation brought up on cheap credit for whom this will be too late.
It's often quite jarring to hear adverts for payday loans and how up to a grand could be put in my account in less than 15 minutes, only for it to be followed by an advert for online bingo or the like.
It's almost the cycle of "gambled all your money away? Get a loan!" followed by "Can't afford your loan repayments? See if you can win big!" Sadly, some are seduced.
The payday loan nettle is being grasped. It should have been long ago, but it is probably better late than never.