November 14, 2010 Leave a comment
Recently I penned an article, published today on the Guardian’s Comment is free section, drawing on the consumer credit (regulation and advice) bill drawn up by Stella Creasy, MP for Walthamstow.
After writing it I had some notes left over which I want to jot down here.
During her adjournment debate held on 9 November in the House of Commons, Creasy noted that of those who use credit over their means, 26% are male, and 34% are women, and of that latter 34%, 50% are recently divorced. And with 1 in 10 people, according to Creasy, struggling to finance themselves until pay day, it is clear to see that desperation leads individuals to something which would put the willies in most people.
Creasy also informs us that 1 in 10 customers of legal loan sharks earn under £11,000 per year, and that even lenders playing by the book are able to okay loans at 272% APR (compared to 9-10% by mainstream lenders).
Tim Worstall, who popped up in the comments section of my article, made the point that all short term loans are going to be high in APR to cover the loan application process itself. Furthermore, loan sharks don’t make as much profit than, say Lloyds bank, so by his account they can’t be so bad (or, perhaps he doesn’t think that, but that legal loan sharks needn’t feel so immoral).
Now call me a Maoist protectionist Nazi Communist if you will, but I don’t think it’s necessarily a bad thing that our government subsidise credit unions with the intention of making more individuals creditworthy, so they don’t end up lining the pockets of the likes of the chief executive of Provident – who recently stated that he expects growth in his target market as a direct result of the CSR.
This is not, as Mr Worstall has accused me of being before, because I am anti-market, anti-people making money. In actual fact, what informs my decision to dislike legal loan sharks, and want to campaign against sky high interest rates, has in recent times been contained by many conservatives and New Labourites alike – the view that having credit dependent and debt ridden consumers in the system is bad for a savings culture (and a savings culture is generally considered quite good).
Regardless of a person’s first principles, markets can’t run themselves, and so it seems appropriate to operate them – as best as possible – to bring about good. Forging a mechanism to limit the amount an agency can charge as interest, while using state subsidy to make more people creditworthy, while we simultaneously battle to cut credit dependency altogether, sits perfectly well with me.
Free marketeer Damian Hinds, MP for East Hampshire, who attended Creasy’s debate, made three points in response to the bill: it is not necessarily party political to support (or even, I suppose, take issue with) the bill; it is not necessarily new; and it is not in conflict with a diverse market. If this friend of the market can agree, why can’t others do the same.