Teej Dew, our Financial Inclusion Programme Director, writes about her thoughts on the news that Payday lenders are to face tougher restrictions
The UK’s payday lenders have been warned that tougher regulation is on its way, to protect consumers.
‘Excellent’ I hear you say, ‘that will sort them out’….
Unfortunately it won’t. Changes that tighten things up are very much welcomed, of course. But removing a lending facility, however unpalatable, doesn’t remove the demand for that facility.
We hear that payday lenders will not be able to extend, or “roll over”, loans more than twice – doesn’t that mean that people will just yo-yo between lenders? They will just go elsewhere, that elsewhere unfortunately will sometimes be a loan shark and thats where the trouble really, really starts.
People who are struggling with payments will be told where they can get free debt advice – ask any credit union in the land and they will tell you that when people are in debt they often try to borrow money rather than getting the excellent help and advice out there that they need to sort out their situation.
So, why is this and what is to be done? It’s about knowledge and capability. It’s about helping people to make the behaviour change they need. It’s about having the right products in place in an accessible way.
I recently heard, in my personal life, of a young person that had stolen £10,000 from his employer. ‘Didn’t he realise he would get found out, why did he do it?’ I asked. ‘Debt’ was the answer. ‘A loan he couldn’t pay because he was on sick pay and then payday loan after payday loan…he was desperate’.
Financial capability, availability of credit and a change of money behaviour will work in the long term but we need to prevent people being caught in this trap now….and that is why I welcome this small but significant step in changing the regulation of Payday lenders.
The Moneymadeclearwales website (www.moneymadeclearwales.org) is a great starting point for people wondering what to do about financial pressures. It provides basic guidance and links to the experts.