Tuesday, 20 November 2012

Usury



Kenny is only twenty. After two years looking he has managed to get a job. He works 60 hours a week in a bar. They are keeping him on and he is getting a raise. In an economy where kids just can’t find work he is someone who deserves all the support we can give, yet when I see him as Duty Solicitor he is in rent arrears and risks losing his home.

It turns out that when he finally got the job he took a small pay day loan to celebrate and thank his parents for supporting him. Then, when he had to repay the loan, which had an apr of 200% he had no money left from his wages, and had to take another loan. Soon all his money was going to shady companies whose dodgy representatives door-stepped him and even his parents. He looks haunted.

Kevin is a pensioner, living with his adult son. Because his son works in a shop and earns reasonable wages Kevin gets little in Housing Benefit – the son is expected to contribute the rest in a part of the regulations known as a non dependant deduction.

Yet Kenny is in rent arrears that climb steadily. He too may be evicted. His son too has taken out pay day loans, and finds his income being hoovered up by the lender. The son is terrified of taking time off work to get debt advice in case he is fired. In any event the queues at the local CAB are round the block.

Kyle is a postman separated from the mother of his six year old daughter. Over the summer his kid started to visit more regularly and he took out a small pay day loan so he could give her a few treats. It looks to me as if he is trying to make sure his relationship with his daughter does not suffer because of differences with her mother, he’s trying to do the right thing as a responsible dad.

You guessed it. He’s in rent arrears too.

Perhaps 1/50 or 1/60  of the clients that I now see as a duty solicitor are in thrall to brutal lending companies which may be called Wronger, or Conga or what have you. These are working class people in social housing with modest salaries who literally can’t put food on their table because of punitive rates of interest on pay day loans.  These are far more deadly than crack; a small taster is enough to hook you for life.

Back in Law School they taught us that there were rules about usury, and the legislation then in place was enough to crack down on most of the unlicensed loan sharks that we saw in the 60’s and 70’s. Today, if you look around your high street, you will see that pay day loan companies are a growth industry, popping up like barnacles alongside betting shops- that other modern mecca to despair.  They will tell you that what they are doing is selling services specifically designed for very short periods- yet perhaps half of their income comes from repeat borrowers.

Far from being curbed by the existing legal machinery, we see that Newcastle football club has looked at putting a pay day loan company on their shirts. The dodgy criminal with a cosh in his pocket of old has undergone an alchemical change, and acquired a glossy corporate face and sugared words that hide pure poison.

Standing up in court I tell the District Judge the plain facts. How wages meant for rent and other essentials evaporate the moment they arrive. In every case we get an adjournment so that the tenant can get debt advice.

Yet if I have managed to achieve something today, tomorrow paints a bleaker picture.

Firstly, although Legal Aid presently funds debt advice, from April 2013 this will be so scarce as to be non- existent.  For every 100 housing cases funded by Legal Aid, the government is awarding 4 debt cases. We will be hamstrung before we even start.

Secondly, alternative sources of credit for people on benefits or low incomes will become almost non-existent. The Government Social Fund which used to provide cheap loans and grants will soon disappear, and Credit Unions are shutting up shop all over the country.

While the Bank of England’s interest rates are as low as at any time since its foundation, corporate sharks are trawling the economy, and we see no sign that Government is prepared to use any of the levers available to it to stop this from happening.  

As a child I was raised a Catholic, and I remember well the story of Jesus scourging the money lenders from the temple for the sin of usury.  If I had been raised a Moslem the concept of any interest rate would have been anathema- far more so these new vampire squids that feed and feed and make corporate merchant bankers  models of restraint and probity by comparison.

The truth is that anyone with a moral compass will recognise these greedy pay day loan companies as deeply wrong. Why can’t we do something to stop them.





2 comments:

  1. >Credit Unions are shutting up shop all over the country.

    What are the causes of that, and do you have a list of ones which have gone?

    According to the industry body the should be expanding.

    Given the changes coming in on direct to landlord rental payments CUs are going to be a crucial link in keeping LHA tenancies in the PRS going.

    ReplyDelete
  2. In the fourth paragraph, "Yet Kenny is in rent arrears...", I think the guy's name is Kevin (see the third paragraph).

    ReplyDelete