19 March 2013

Payday Lending and the Justice System


The Office of Fair Trading has identified poor practice by payday lenders. It seems they “fail to work out whether people can pay” the loans they make to them, and therefore people unwisely take on loans they cannot pay back.

The theory, presumably, is that even though the customers know they will have to pay substantial fees and interest some weeks in the future, they still sign up, because they think the future problems won’t be as bad as the current problems which are solved by getting the money up front. The OFT is claiming that it is irresponsible to put people in that position.

They may well have a point. Many people do seem to dismiss from consideration adverse consequences that are a long way off: even if they are told that a debt will double in size over six months if they don’t pay it back promptly, they either don’t care, or assume something will come up, or assume they can somehow get away without paying.

But if the Office of Fair Trading takes this view, which I think is a reasonable one, I wonder what they think about the way the criminal justice system works in this country?

Let’s say you feel a taxi-driver has disrespected you in some way. Beating him unconscious might be one way to resolve the situation. However, if you do that, you could be tried and sentenced to some kind of punishment.

Given the OFT’s assessment of the capabilities of Wonga’s clientèle to judge whether they should take on a debt payable in a month or so, how much difference does it make whether you are sentenced for GBH next week or in twelve months’ time?  If the prospect of having to pay £2,000 in a year isn’t putting people off borrowing £250 for a new phone today, is it going to put them off grabbing the same phone off a passer-by?

I found the taxi-driver story because it got slightly more reporting than usual, the culprit being a player on the local football team. I don’t think a new signing to Luton Town is actually a celebrity in any way that would have made his treatment different, but I needed the extra reporting, because when the local press report convictions and sentences, they don’t generally say when the offence was committed. And while the papers do contain a handful of reports of crimes committed, I have not been able to match up any crime reports with any court reports, outside of major crimes like murders. It’s the treatment of the routine minor violent crimes that I am interested in.

3 comments:

Anthony Corbett said...

Not sure how it works in the UK, but with a lot of situations related to credit, in the USA, after 7 years, it disappears. So if people make unwise decisions, perhaps that may be the reason?

They might be at a point in their life where they don't care about their credit. I was that way once - though I consider myself more responsible now. The way I saw it, by the time I would be 30, all the good/bad decisions I had made with credit cards when I started college will no longer be on my credit. So if I couldn't afford a card, ultimately I simply didn't care too much about it.

They don't really teach this sort of thing in schools either, so it's easy to get confused by it all, or simply not to care. I kinda wish they taught a class, even if it was just a 30 minute lesson, on this type of like. Using credit cards responsibly or filling out taxes correctly aren't things people think about often. A lot of my peers growing up thought of credit cards as free money.

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