MY GENERATION was the last to have the image of Jesus clearing the money-lenders from the temple burned into our consciousness in primary school. But my generation was the one that matured into the “Me” generation.
So along with some other fairly sound practices in home money management, we left behind our disapproval of lending. We took to the transatlantic cultural enterprise of acquiring our consumer hearts’ desire on ‘tick’.
Before we found life could be more pleasant, more quickly by borrowing money, young mums would save up for the pram, or a new bedroom carpet. But the transatlantic way of borrowing was upfront and easy to access.
The only hazard to avoid lay in taking on too much. It was a source of gossiped disapproval when it was known the lending company had repossessed, for example, an item of furniture.
We ditched the old ways, took to borrowing like ducks to water, and so helped create the market for pay-day loans.
But we shouldn’t beat ourselves up too much. During the decades of growth in the economies of what was called “the West” we were encouraged to spend, not save, by everyone involved in money, from Gordon Brown’s guru, chairman of the American Reserve, Alan Greenspan, to our local bank manager.
When the economic tsunami hit, people had meagre savings and often a shedload of debt.
If redundancy entered the equation, some, to keep a roof over their heads, felt forced to take a pay-day loan… something designed to bridge a short gap in business or personal cashflows.
An unexpected event – a family funeral – could interrupt repayment. This triggers the usuary-like rates of interest that are always part of the deal. This can mean that in a matter of weeks a manageable, average loan of £300 from any pay-day loan company, at a not unfair, though higher rate of interest than a bank’s, very quickly moves into an APR of thousands.
Buyers should beware here, pay-day loans are not for emergencies. There is a huge difference between an oil worker buying a car knowing next month’s salary is in the post and a couple with a young family with no other means of keeping their home and no promise of income other than benefits.
The clamour for legislation has matched the pay-day loan firms’ expansion. In Westminster, MP Stella Creasey is pursuing a relentless but lonely battle against dot com lending firms.
It is an indictment on Westminster that her attempts have met with indifference. Yet, we can’t stand by while these loans make life hell for so many.
Eighteen years ago, when I first stumbled onto Wonga.com and similar vultures, I was concerned to learn their trade association’s strategy statement admitted the next market to be targeted was poorer people. But how can such obviously anti-social business practices go unregulated?” In America, some states have gone as far as banning dot com lending companies, but it is at least doubtful the same could be applied in EU countries.
But whether or not regulation proves to be feasible, in the meantime, in an effort to deal timeously with the fast-growing numbers of people caught in the pay-day loan trap, I and some colleagues in the Scottish Parliament have concluded the best antidote to pay-day loans would be loans from credit unions.
We have approached various credit unions to discuss the feasibility of their expansion to meet a growth market. There is a wide variation in the size and scope of credit unions in Scotland, and they are the only organizations, despite what I would like to see, which have the right to determine their future development.
However, on the assumption credit union numbers will expand, it may be sensible to tell colleges they could attract people interested in establishing a credit union.
The existing credit unions may support startups as well as design suitable courses, or they copuld expand themselves
We may not be able to beat them, so we will join them and provide a better, fairer service.
l Margo MacDonald is Independent MSP for Lothian