Where does usury start and decency stop?

Someone I know recently accompanied a friend to a well-known high street lender to redeem jewellery pawned to raise quick cash to meet a family crisis. Arguably at the more respectable end (if there is such a thing) of the much maligned payday loan market, the service charges and interest itemised on the company’s till receipt were eye-wateringly high for the modest hundreds of pounds made available over the counter a few weeks earlier.

The gold items were very personal and it was as though the transaction had contaminated the love and emotional value they represented. Reunited with their owner the jewellery has given hope and joy to a family who still need a great deal of support.

Some of us may not appreciate how the other half lives but this true story highlights the plight of payday loan victims who feel there is nowhere else for them to turn to. Described by one journalist as the crack cocaine of the money lending world, fuelling the must have it now generation, what is to be done about payday lending?

Credit unions charging modest rates of interest are a great idea but need many regular small savers to raise enough capital for small loans to members, so may not reach the most desperate of individuals who simply cannot save in the first place. Also, although many community groups and churches are laudably involved in credit unions, there is probably not enough capacity to reach local needs across the country.

To rein in the payday lenders the Government could make a difference by tightening the rules on TV advertising, maximum amounts to lend to individuals, cooling off periods (alarmingly, drunk people can commit to loans) and compulsory credit checks. At present it seems not unlike the infamous product mis-selling scandals of the big banks.

Then of course there is the embarrassment in finding that church or charity assets are tainted by investments in companies with links to payday lenders. As the Archbishop of Canterbury has admitted, that’s an error he was not pleased to discover. However it illustrates the challenges that organisations who wish be socially responsible and to invest ethically face in working with those who manage their investment funds.

Usury is the old fashioned religious term for condemning excessive profit compared to reasonable rates of interest to facilitate reliable borrowing and repayment in the community. Of course we ask, what constitutes reasonable – a credit card APR of 18% or a payday lending rate of 6000%?

We shop around comparison websites for the best prices for everything these days. I confess that I have purchased foreign currency for holidays at a payday lender – it’s another service they offer to people. But if my cheap euros come at the expense of the destitute and the desperate, then I’ll go elsewhere.

 

This article appeared in Dundee Courier on Friday, 2 August 2013.

Categories: Bishop, Publications