'Being poor is expensive.
Banks fall over themselves to lend to rich customers who promise large glittering deposits and low risks. They tempt them with sweet deals and low rates. The less well-off are treated very differently. Many at the bottom are denied credit from mainstream lenders, or forced to pay higher premiums.
In the wake of the financial crisis, more of us are slipping into this category. We are compelled to find credit elsewhere.
Payday loans are therefore on the rise.
Carl Packman’s book is fantastic because it lifts the lid on this industry and exposes the growing power that it wields. Documenting the rise of the industry with detailed evidence,Packman shows that, although there have always been loan sharks, there has never anything as large and powerful as the current set of payday loan companies operating virtually unchecked in the mainstream of the UK.
But this book goes further than simply analysing the problems: it also offers an honest discussion about practical solutions. Packman raises difficult questions: for example, whether credit unions should be permitted to raise their interest rate limits to justify costs to poorer lenders. Politicians – most of whom tend to be in a stable economic position with little experience of these companies – should take note.
Of course, irresponsible lenders will always exist as long as people are poor. The Left should always fight the causes of poverty that force people to accept devastating conditions on credit. But as Packman exposes, it has become clear that payday lenders are not just profiting from poverty; they are adding to it. If we want to stop people getting into unsustainable debt, we have to give local people more power to limit these stores, and to provide them with alternative, safe and cheap means of accessing credit. The alternative is not just immoral.
It’s unaffordable.
Rowenna Davis, journalist - from the foreword to Loan Sharks
Publication date: October 2012 (paperback)
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About the author
Carl Packman is a writer, blogger and researcher.
He has worked for various organisations working in health, education and children’s policy and has written for many publications including the Guardian, the New Statesman, Huffington Post and Tribune Magazine, as well as regularly for some well-known blogs such as Left Foot Forward, Liberal Conspiracy, Open Democracy and the LSE blog.
Reviews
Payday lenders have exploded in Britain over the last few years and - though a growing cause of concern as they prey on some of the poorest people in society –their rise has not been properly understood. That is why Carl Packmanʼs book is so important and timely, exposing as it does the disastrous consequences of a Britain blighted by low pay and falling living standards.”
OWEN JONES, AUTHOR, CHAVS
“One of the most disturbing consequences of Britainʼs growing income divide has been a surging dependence on personal debt, especially amongst those on low incomes. Carl Packmanʼs powerful and insightful book provides the first detailed exposé of the rise of the nationʼs poorly regulated, exploitative and multi-billion pound loans industry and the way it has ensnared so many of the nationʼs most vulnerable citizens.”
STEWART LANSLEY, AUTHOR, THE COST OF INEQUALITY
Contents
Contents
Acknowledgements
Foreword - by Rowenna Davis
Introduction
1 In the beginning: money lending through the ages
Ancient usury – the shape of things to come
Usury and just compensation – the religious conversations on finance ethics
14th century Italy – the struggle between legitimate and black market lending
Edwardian and Victorian era debtors – the forgotten British class war
2 Consumerism, the rise of the leisure class and the age of bad debt
Consumption is never just consumption
Consumer society – exclusion and inclusion
The growth of consumer credit
The personal debt context
Wealth redistribution measures
The real causes of poverty
3 Loan sharks
The payday loan market – its origins and growth
Provident Financial
Cost vs. convenience
Pawnbrokers
High street chains
Regulating cash lending
The US experience
Market growth
Payday players
Who are payday loans for? Do they justify their prices?
Types of payday user
What loans are used to fund
Are the charges justifiable?
Comparison with bank charges
Case study: the story of Steve Perry
The press and the payday lenders
Is Wonga a payday lender?
4 Regulation – the discussion point
Regulation and monitoring bodies
Codes and guidance
Arguments for and against price controls on credit
The social fund and crisis loan
Recommendations
5 A note on illegal loansharking
Your friendly local loan shark
Fighting the criminals
6 The future of lending – credit selling in an age of heightened
consciousness
The need for financial reform
Credit unions and other alternatives
Social enterprises
Microfinance
Re-energising the credit union
7 Conclusion
Why not ban the payday lenders?
Unemployment and underemployment
Housing costs and fuel poverty
Lack of financial education
Conclusions
Endnotes