Payday loans legal loan sharking

CASHING IN ON AUSTERITY | CONSUMER COUNCIL LOBBIED TO ACT

» BY CONOR MURPHY MP, Sinn Féin Assembly Economy Spokesperson

CONOR MURPHY MP

WE’RE ALL FAMILIAR with the strong-arm tactics used by illegal loan sharks but a new industry is being allowed to flourish because of the extreme austerity measures being imposed on society by governments and posing hidden dangers of debt from legal lending practices.

‘Payday loan’ companies are cashing in on the dire economic straits that many people find themselves in. When these companies advertise loans to make ends meet until the next pay day, they are often targeting people on benefits who are not fortunate enough to have a next ‘pay day’ — most of them are waiting on their next benefit cheque.

Many companies don’t even attempt to disguise that their target is not only working people with a regular income. They are very explicit in advertisements with catchphrases such as ‘one-minute application’, ‘same-day transfer and no credit check’, ‘payday loans for unemployed’ and so on.

This is exploitation of some of the most vulnerable in our society. At interest rates at times equating to over 1,500% APR it is nothing short of loan sharking. Failure to repay on time can have serious implications. People who are desperate and in debt are under the impression that if payday loan firms are allowed to advertise and they are lawful then they’re okay.

If you’re in financial difficulties, your first port of call should be one of the many community advice centres, a community-based money advice service or credit union

I am lobbying the Consumer Council to co-ordinate a campaign to put pressure on the Financial Services Authority to outlaw such practices or at least impose a cap on the rates that can be applied in these circumstances.

Austerity does not seriously impact on the daily lives of the very-well-off or the super-rich.

It is incumbent on those of us in government to ensure that we manage our budgets in such a way that will, to the best of our ability, protect the unemployed, disadvantaged and vulnerable from the ravages of austerity.

The choices being made by the British and Irish governments are creating the conditions whereby the recent emergence of so-called payday loan companies has mushroomed. And while this type of loan sharking is particularly concerning, it should not be overlooked that there are other long-established lenders out there who are also charging exorbitant interest rates of 190% and more. These companies, some of whom have been soliciting business on a door-to-door basis for many years, offer voucher type cheques to be redeemed in ‘participating’ stores. These companies are particularly active in areas of high dependency on benefits where they know people are under financial pressure.

‘Payday loan’ companies are cashing in on the dire economic straits that many people find themselves in

I strongly advise people in the absence of proper governmental regulation of these opportunistic lenders to resist the temptation of what looks like a handy short-term solution to a problem as it seldom has that result in the long run.

If you’re taking on any type of loan arrangement, be sure about the total cost over the life of the loan. Read the small print to find out the level of interest and the consequences if you’re late in payments or default in any other way.

If you’re in financial difficulties, your first port of call should be one of the many community advice centres throughout the country run by organisations with your welfare and best interests at heart and which are not driven by profit. Resist the temptation of payday loan offers. The total price at the end of the day could be something else you cannot afford.

MoneySavingExpert’s warning

HOUSING CHARITY Shelter reported in January that almost a million people have turned to a high-cost payday loan to cover their mortgage or rent in the past year.

Martin Lewis, founder of the MoneySavingExpert website, said:

“It is incredibly worrying there is now evidence of people using payday loans to meet housing costs. Many struggling with core rent or mortgage commitments will struggle to repay payday loans on time too.

“While it is an obvious temptation to grasp these loans as a lifeline, in the long run it may hurt more than help.”

Advice & Help

» Six Counties: Money Advice Service: www.moneyadviceservice.org.uk

» 26 Counties: Money Advice & Budgeting Service: www.mabs.ie

» All-Ireland: Irish League of Credit Unions: www.creditunion.ie