Where’s Wonga? Yorkshire councils block payday lenders
Six Yorkshire councils are blocking the websites of all payday lending companies on council-run computers, in what they say is the biggest initiative in the country to take on the industry.
Log on to a publicly owned computer in west Yorkshire and you may think the payday loan industry has disappeared off the face of the internet.
If you try and access one of the companies’ websites – from a library for example – you will be redirected to a page of financial advice, information about credit unions, and signposting to voluntary sector organisations that may be able to help provide cheaper, second hand goods.
West Yorkshire’s five councils – Bradford, Calderdale, Kirklees, Leeds and Wakefield – along with City of York council, have brought in the drastic move in an attempt to tackle what Leeds Council Leader Keith Wakefield said was a “growing crisis” of payday lending.
People need to borrow, but it has to be done with a degree of ethical balance of needs and responsibilities – Leeds council leader
He told Channel 4 News: “In Leeds alone, we have over 60 types of lenders … and given the amount of personal stories coming through, we felt we had a responsibility to do something about the promotion of these companies as an attractive option for people who are struggling.”
The six councils estimate that 78,000 residents in their catchment areas are currently reliant on payday loans.
Industry investigation
The access block follows the Office of Fair Trading’s (OFT) referral of the whole £2bn payday lending industry to the Competition Commission for investigation because of concerns over its impact on vulnerable customers. The OFT raised concerns over rates of interest of over 1,000 per cent, and said that most of companies’ profits come from loans that borrowers can’t pay back on time.
It also follows news that market leader Wonga is making weekly profits of £1m, as the number of people using its service has risen to over one million. In July, the Archbishop of Canterbury said that he wanted to “compete” payday lenders out of existence by expanding credit unions as alternative providers of loans, but later had to admit to some embarrassement when it was revealed that the Church’s pension fund had links to Wonga.
The Yorkshire councils, which represent 2.4m residents and employ 67,000 employees, will present a white paper with various proposals on tackling the issue on 11 September, and Mr Wakefield said the measure is expected to be approved with cross-party support.
In response, the Consumer Finance Association, which represents some of the largest payday lenders in the UK, said the councils’ actions may stop people reliant on credit from accessing it.
“We would be concerned if, without evidence of its impact, this action prevented people in Yorkshire having access to responsible credit providers,” said Chief Executive Russell Hamblin-Boone. “Responsible lenders explain the costs up front in pounds in pence; use credit reference agencies to check your details and will not lend to you if they think it will make your financial situation worse.”
Council ‘duty’
However a recent Citizens Advice Bureau survey found that seven in ten payday lender customers are put under pressure to extend their loan, and that loans were given to under-18s and other vulnerable adults.
In addition to blocking access, the councils are taking steps to speed up the process of applying for a credit union loan, so they can better compete with payday lenders. And they want national action: Mr Wakefield said a cap on interest rates charged should be considered.
“We have a duty and responsibility to make sure that vulnerable people do not fall prey to lenders,” he told Channel4 News.
“People need to borrow, but it has to be done with a degree of ethical balance of needs and responsibilities.”