In recent years, loan companies have been using strong arm tactics against vulnerable borrowers. Now, the Office of Fair Trading has finally decided enough is enough.
A certain Mr Shakespeare once wrote incisively:
“Neither a borrower nor a lender be;
For loan oft loses both itself and friend”.
Loan companies are not in the business of making friends, they are in the business of making money. Unlike banks that can create credit at the stroke of a pen, the money they lend is real, so it is only fit and proper that they should charge higher rates of interest. The main problem with lending money though is borrowers, they borrow too much, or when they shouldn't borrow at all. This is what appears to have happened to Emma Burgess, a young woman from Manchester who took out a loan of £100 from a payday loan company. This is a relatively small sum, but somehow it mushroomed into £750. Her plight was featured on the BBC Breakfast news programme this morning, but you can read about it here.
For those who can receive it, today's BBC Radio programme Money Box discusses the issue of payday loans and the tactics used by some companies to recover them. Yesterday, the Office of Fair Trading, the government watchdog responsible for protecting consumers, launched a wide ranging review into the practices of payday loan companies. This is long overdue; details can be found in this press release on the OFT's website.
Needless to say, there is also a criminal element involved in lending, mostly at the bottom end of the market, and over the years both the media and the courts have heard some real horror stories about vulnerable people being subjected to threats, intimidation, extortion and sometimes violence. These activities are by definition criminal, and the police rather than the OFT should be the first port of call for anyone suffering at the hands of illegal loan sharks and other parasites.