According to research by Money upermarket.com the average Briton expects to spend £437 on Christmas this year. That’s an awful lot to blow on tat you can’t afford for family and friends who don’t want it.
Assuming we all spend exactly the same amount, then there should be no net gain for anyone other than the retailers. However, there is a new breed of retailer setting up stall on our high streets and what they are selling doesn’t come gift-wrapped in paper and bows. They are the “pay-day” loan companies, modern-day pawnbrokers for whom everyday is Christmas Day.
Three of these companies have set up shop within a few hundred metres of each other on my local high street, where beneath their gleaming yellow awnings they enrol a steady stream of the financially excluded into a damaging spiral of debt.
In deliberately cynical marketing campaigns, these doorstep robbers advertise their services to the financially illiterate on daytime television. In order to facilitate a loan, you don’t even have to leave the house. “One call and we’ll deposit the cash you need in your account today.”
One major player, a company called Provident, which sounds a little like Prudential, offers a quick and easy loan calculator online. So I filled it in. A loan of 500 euros, to be paid back over six months would result in my owing 780 euros. This represents an annual percentage rate (APR) of 187.2 per cent. A page of customer testimonials adds to the impression that Provident is actually Father Christmas.
“I had my first loan when I was 18 and I’m 43 now, so I think that’s a good indicator of customer satisfaction”, says Dennis from Great Yarmouth. Dennis doesn’t tell us whether he has taken out subsequent loans or is still paying off the first one.
“Enjoy a special Christmas this year with some extra cash”, trumpets Provident’s current advertising campaign.
“Have the Christmas you want with a hassle-free cash loan from Provident. We make things simple with no hidden charges and a speedy, friendly service. With Provident you can spread the cost, and the joy of Christmas with the loan that’s right for you.” The company may as well add: “A loan is for life, not just for Christmas.” That’s certainly the experience of some customers whose testimonials do not appear on its website. In a Christmas marketing letter, decorated with holly and a cracker, posted to some of London’s poorest residents, Provident invites “tenants and the unemployed” to apply for a loan. “We really are here for you” – just as Quilp was there for Little Nell and her grandfather. And look what happened to them.
Now, as we approach Dickensian levels of inequality and despite David Cameron’s oft-repeated mantra that irresponsible borrowing got us into our present difficulties in the first place, the Prime Minister flatly refuses to countenance regulation that would effectively cap the amount of interest that can be charged on a personal loan, (rates which can roll over into many thousands of per cent) despite a recent survey, conducted by PR Week, which found almost three-quarters of those asked support the idea.
Prior to the credit crunch, the high-cost loan market was worth an estimated £7.5 billion. Since then it has quadrupled in size. Perhaps the Government is simply reluctant to impede the growth of a rare British “success” story.
Labour MP Stella Creasy, who has campaigned hard on this issue, says: “Two in every five people struggling with debt say their financial problems are as a result of this kind of lending.
“Christmas is around the corner and the Government has to act before more families get into problems.”
Last week’s autumn statement by the Chancellor made it clear that things are going to get a whole worse for the consumer.
As always, it is those most vulnerable to sharp financial practices who will be most badly hit. Credit Action says that of the
45 changes made to the tax and benefit system 26 will combine to leave the poorest households £200 worse off. If you rely on child care support, make that £1700 poorer.
The Government’s on-going assault on the poor, the disabled, the needy and the vulnerable means that personal debt is no longer a private matter, yet one of the coalition’s first acts was to axe the Financial Inclusion Fund, a Labour Government initiative with three stated objectives.
To provide access to free face-to-face money advice, to provide access to banking services, and to ensure access to affordable credit.
A person on a low income can currently expect to pay on average, 10 times more interest on the same loan than a better off borrower. This should be completely unacceptable, as it is in most European countries. In America, many states have banned high-cost credit altogether.
That the Conservative-led Government is happy for Britain to lead the world in legal loan-sharking should be a source of great shame. Banning this great British extortion racket would put money back into the pockets of some of the poorest people in the country. It would raise living standards,
ease fuel poverty and boost the economies of some of the hardest hit areas in
the country.
As Charles Dickens himself said on the closure of Marshalsea debtors’ prison, where his own father was jailed for failing to pay the baker for bread: “It is gone, and the world is none the worse without it”.
Sign the petition to end legal loan sharking @compassonline.org.uk
