Has anyone spotted the irony of how one Government watchdog’s crackdown on a small, insignificant area of the consumer credit market has played right into the hands of those who own the lions share and who instead, should be attacked on epic proportions for their bad behavior Evidently, Goliath is protected by not just one watchdog but two, and David in this nightmare will never overcome.
We’ll join the dots together to explain, although the picture painted isn’t a pretty sight. In 2015, the financial watchdog enforced harsh controls on payday lenders with a price cap on high-cost short-term credit in an attempt to protect borrowers from eye-watering fees and debts spiralling out of control. What has this meant? Just 60 authorised firms remain, where once there were over 200, and consequently more people denied access to credit.
So, where do we find ourselves a year later? Are consumers better off? Has there been a substantial reduction in people being ripped off? Has there been a surge in credit union activity? Funnily enough, the answer is no – instead, short-term credit from mainstream financials that people have had to turn to is now more costly than borrowing money from payday lenders!
Don’t just take our word for it – even the consumer giant Which? has proved it. Alex Neill, director of policy and campaigns at Which? said of their research findings, “People with a shortfall in their finances can face much higher charges from some of the big high street banks than they would from payday loan companies”.
Like Teflon, mainstream financials have continued to peddle their bad behaviour and consumers are worse off, not better! Overdraft charges at some high street banks are as much as five times higher than the maximum charges of £22.40 on a payday loan per month. To add insult to injury, banks are also greedily cashing in by hiking credit card charges, 'ratcheting up rates' from 11.9 to 18.9 per cent for some, and annual fees meaning consumers are paying up to £470 more on typical balance of £4,000, despite the fact Bank of England official interest rates have been cut. David Rodger, chief executive of the Debt Advice Foundation, said it was “unfair that consumers should suffer in the quest to recoup profit”.
The Competition and Markets Authority was also accused this week of letting down the financially vulnerable in its recent report on banking and it’s not hard to see why. The accusation of their "dereliction of duty" is because they have decided not to cap unauthorised overdraft charges. Instead the CMA's recent report suggested that banks should each set their own maximum monthly charges. So, what’s good for Goliath evidently wasn’t for David.
And, let’s not overlook the fact that the financial watchdog, whose CEO has said “We will continue to actively protect consumers and markets from the criminals who seek to exploit them”, scrapped the publication of their own report into the banking industry after a wave of financial scandals. Usually, the findings of their thematic reviews are published in a report – it seems the banks shout louder than their own watchdog and the report was well and truly buried. A spokesperson for the watchdog confirming at the time that “A focus on the culture in financial services firms remains a priority” and “We have decided that the best way to support these efforts is to engage individually with firms to encourage their delivery of cultural change”.
So let us get this straight – cap high-cost short-term credit providers, but not the banks who charge up to £100 a month for an unarranged overdraft, plus other fees on top. Even the Treasury Select Committee heard this week that the cost of borrowing £100 from a payday lender is cheaper, with the chair of the committee, Andrew Tyrie MP, expressing concern, "The weaknesses identified today were already evident from the interim report of last year. The committee was deeply disappointed by what it heard."
If the watchdog’s objective is to be believed, then why do the biggest sharks of them all continue to fail in standardising charges and interest to reduce the risk of spiralling debt or safeguard consumer protection and reduce the detriment that consumers may suffer?
Not content on causing the financial crash, banking bosses continue to get off scot-free despite their bad behavior costing £53 billion since 2000 in compensation and fines. From PPI, pensions and packaged bank account mis-selling to name a few to Consumer Credit Act breaches and unfair unauthorised overdraft charges; a culture of greed is endemic, irrespective of how they try and fleece people and highly unlikely to change.
Banks have proved themselves unscrupulous time and again, but their continued misconduct is a disgrace to those who are meant to regulate them. Consumers don’t actually benefit from regulators, they are just a false safety net, and who it seems protects the giants and not the little people.
So, the next time a bank gives you advice, or tries to sell you something, put your fingers in your ears and sing “la la la”.