Payday loans – a response
On 25 July, our PR switchboard hit the roof as the Archbishop of Canterbury went public with his desire to 'compete' payday lenders out of business. The UK wanted to know what we thought, no doubt to get both an opinion and probably looking for a dissenting voice. They didn't get any dissension from us – we are big fans of Justin Welby, who is a servant-hearted, Christ-centred, man of God. I believe he will be great for the Anglican church (and as the denomination with the highest number of CAP Debt Centres, we are interested!).
At CAP, we have seen the rise of payday lenders over the last few years, having to adapt some of our policies to handle this new element of the industry. As well as doing this, we have done what we always do: engage with these new companies, plead the case of the debtor and use our relationship to positively influence their policies to benefit vulnerable clients. While we do all of this with the utmost of respect, we have to acknowledge that this form of credit causes greater consternation than pretty much anything we've ever seen, excepting of course illegal loan sharks. It is simply wrong that someone should get approved for a loan so quickly, with so little thought being applied as to whether they can afford to pay it back.
As a result of the credit crunch, the ease with which one can get credit has changed dramatically. It is simply much harder to get credit nowadays. You have to do so much more to prove you can afford it and that you are a 'good' risk, and that is a really good thing! However, as the mainstream lenders have re-introduced some common sense to their lending practices, the payday lenders have stepped into the gap. Taking the opportunity of little competition, they are charging huge interest rates. The other day, I read a yet another story of a lady driven to attempt suicide. Right at the heart of her story was the desperation of having to resort to getting payday loans to feed herself and the terror of having to handle these companies as they chased their debts. Thankfully, CAP now stands in the gap and most of the payday lenders 'play ball' and cooperate with us, but every new company needs winning over!
So, here at CAP, we are grateful that the Archbishop has spoken up. This issue needs to be in the government space, because this new sector of the industry is causing pain and injustice. We, the Church, must speak up about this issue and do something practical to help those caught in the midst of it.
As for Credit Unions? People will always need credit and, for the poor of this land, to have Credit Unions as an answer to payday lenders or doorstep lenders would be a brilliant thing. As for putting payday lenders out of business? Well, we've always thought big at CAP and that is one audacious vision that Justin Welby is taking on! For us, we're praying that with God's help this vision can become a reality and that at the heart of every Credit Union, there will be the CAP Money Course providing the education to prevent borrowing in the first place.