Jayne Dowle: Millions driven into clutches of payday lenders

It is estimated that more than eight million people in the UK have paid a visit to such a money broker in order to stave off disaster, landing themselves in debt with an interest rate to make your eyes water.

The payday loans industry has been regulated to some extent in recent years, thanks in no small part to the campaigning of Barnsley Central MP Dan Jarvis, whose constituents are often more vulnerable than most to irresponsible lending practices.

In April 2014, the Financial Conduct Authority put the spotlight on higher risk products, such as payday loans, when it took over responsibility for consumer credit regulation. Around 800,000 fewer people took out a payday loan during the following 18 months. However, there are still millions hocked up to their eyeballs.

And it remains a shadowy world. All too often, as new research from the financial ombudsman finds, one payday loan leads to another, and another, simply because the borrower cannot find any other way of paying off the original sum advanced. This cycle of financial desperation means some complainants have taken out anything up to 20 loans.

That is why it is sad, but inevitable, to hear that complaints about payday lending companies rose by more than a third in Yorkshire over the last six months of 2016, according to the Financial Ombudsman.

During this period, the Ombudsman received around 380 payday lending complaints from Yorkshire, up by more than a third (36 per cent) compared to the first half of the year. Before you judge, ask yourself what you might do if all other avenues had been exhausted?

Imagine the typical payday loan customer and you may conjure up someone entirely on their uppers, scratching down the back of the sofa for coppers. Yet the ombudsman says that complaints came from nurses, engineers, teachers and business analysts. Before you dismiss this particular financial option as “not for the likes of us”, stop and think about why payday loans need to exist in the first place.

In towns like Barnsley, the over-riding factors are simple lack of money, in particular low pay and zero-hours contracts – increasingly affecting even professionals such as teachers.

Countless people in work are simply not earning enough to make ends meet, let alone put anything aside. When a financial challenge strikes, it’s impossible to meet it any other way. Say the washing machine breaks down, or the car fails its MOT. A couple of hundred pounds could be all that is needed, but a payday loan might be the only option.

A recent survey by ING bank suggests 28 per cent of UK adults have not got a single penny in the bank.

Yes, the bank. And financial companies in general. Since the credit crunch, these institutions have become so risk-averse it’s a miracle if they lend anything to anyone, ever. This is one reason why those with a less-than-perfect “credit rating” end up with no alternative.

The attractive “headline” rates banks advertise for personal loans are often only available to customers meeting criteria so strict, successful applicants probably reside in a nunnery.

Discretionary spending? If having your hair cut and buying the children new school uniforms is considered a luxury, we might as well all give up and go on benefits. If you have been assessed recently for a personal loan or a mortgage, you’ll know what I mean. I spoke to a friend the other day who had recently decided to buy her council house. She was required to submit every piece of her personal financial history, going back a decade.

It’s no wonder countless individuals are falling through the cracks, and falling prey to payday lenders. Gone is the personal touch, the bank manager who could make a decision over lending you money face to face. Our local branch of the Yorkshire Building Society in Barnsley town centre has recently become a betting shop. I think that says it all.

Hand over every detail of your outgoings to a person on the end of the phone, spend 45 minutes having your life examined in minute detail and then chances are when everything is keyed into the computer, it will still say “no”.

I would never blame anyone for resorting to a payday loan. I might not even entirely blame the companies themselves, because they would argue that they exist to provide a service which is sorely needed.

I do, however, blame the financial services industry for closing off entire avenues of borrowing to those who need it most. And I blame the Government too, for failing to listen to warning after warning about what happens when people simply don’t earn enough to survive.

None of us can afford to be smug about payday loans, least of all the banks and the preaching ministers.