Published 23 Jan 2012, Daily Mail, Letters to the Editor
James Coney in the Money Mail 18th January 2012 (“Banks can easily fix this flawed system”) highlights rightly the fact that the system is geared towards “the vulnerable paying for the better off”.
However, this is only the tip of the iceberg. Banks, Credit Card and Store Card operators, Mail Order companies and worst of all loan sharks and those known by a camouflaged name, the so-called Pay-Day loan providers all work on a similar principle. They can afford to lend money out indiscriminately at exorbitant rates, as these include provisions for defaulting customers: The higher the risk, the higher the interest rate. They are exploiting the socially weak and uneducated by luring them often into spending money they do not have and in the most expensive way. Frequently they are driven deeper into debt and in the end it is invariably the state that has to pick up the pieces with social welfare support. It is a disgrace of the first order and one of the reasons for British private household debt to stand at 1.5 trillion.
The Mail has often been critical of European ways – I wished it could break with this tradition and start a campaign to outlawing this practice of exploiting the weakest group in society. Countries like Germany, the Netherlands, Switzerland have tough usury laws to protect this most vulnerable group. There any contract or deal that carries interest rates above 18-20% pa are nil and void and unenforceable in court. Repeated offenders can be imprisoned. It is noticeable that the above mentioned countries are also those doing reasonably well in the present economic climate.
As this proposal would put half of Britain’s financial services operators behind bars, a law like this would have to be introduced over time and with decreasing rates starting maybe with 30%, which put at least an immediate end to the horrible loan sharks.