In this extract from his new blog, Walter ponders the ethics of the UK's financial system and why it fails to protect the poorer members of society...
And lastly: “Gangsta’s Paradise”
(With respect! Coolio and Death Row Records)
Back in Brooklyn (sometimes called “Crooklyn”) and “back in the day” in the 1950’s there was no shortage of so-called loan sharks.
Loan sharking was a mainstream activity for gangsters of all ethnicities and mob affiliations. Loan sharks charged anywhere from 400% to 1000% interest. If you didn’t pay / couldn’t pay they either attended to the “collection procedures” themselves or farmed out the work to “sub-contractors”.
Loan sharking in the US was and is illegal and every US state has “usury laws” capping the rate of interest that any lender can charge his customers. Additionally, among the things Brooklyn loan sharks couldn’t do was advertise their services on TV or get themselves listed on the New York Stock Exchange
London 2012- As many people know the UK has no usury laws, it did once (the 19th Century). So-called “Pay Day Lenders, / “Door Stop Lenders” charge as much as 4000% interest and disclose their rates (by regulation) without embarrassment in TV and tabloid news adverts. Their operations are deemed legal and some of them are listed on the LSE and sponsor various public entertainment “events”.
Needless to say Pay Day Lenders prey on the disadvantaged, the powerless and the excluded. The British “Nanny State” is keen to make sure you have your “Five a Day” and to render all smokers pariahs, but, it doesn’t seem concerned about the financial rape of that same “class” it’s so keen to otherwise socialize through parenting classes, tax credits and back-to-work programs.
It may not be very useful to get people back to work if in great part all you are doing is upping the opportunities for Pay Day Lenders to find new and somewhat fatter prey.
Some people in the UK will maintain that the effect of US usury laws is similar to Prohibition, it just “drives the practice underground”, better to regulate it than suppress it. No Prohibition and there would have been no bootleggers.
“What is to be done?” as Vladimir Lenin said: Credit Unions would be a big step forward to giving the “financially excluded” a chance to build their lives on a reasonable financial basis without wasting time and effort on lobbying and subsidizing the high street banks to include a group they have no interest in serving and in fairness to them no real ability to serve effectively and without condoning and facilitating loan sharking which even without the threat of physical violence is unacceptable in the 21st century.
Carl Packman's book ''Loansharks'' will be published by Searching Finance later this spring.