Six things your council can do now to tackle legal loan sharks
Despite the payday loan industry promising to clean up its behaviour, Citizens Advice evidence shows that payday lenders have broken their promises. We know councils are concerned about the impact of payday lending on their communities so starting this week we are hosting a series of guest blogs from councils, in which they talk about the work they are doing to tackle irresponsible lending practices.
Please note: Any opinions expressed within the blog are those of the author and not necessarily held by Citizens Advice.
I’ve been asked to share the work we’ve been doing in Kingston to tackle payday lenders head on.
People who go to payday lenders are, more often than not, forced into it by their circumstances. They’ve exhausted all other options and are trapped in an economic black hole, where the worst parts of our financial services prey on the most vulnerable.
So what can be done?
Capping the interest rate on payday loans is a good start and I’m glad the coalition government has committed to this.
And in Kingston, Liberal Democrats on the council have done everything we can to steer people clear of payday lenders and mitigate some of the welfare changes where we can.
But what does that mean in practice?
1) Importantly we’ve protected some of the poorest people from the removal of council tax benefits and we’re paying for it by charging more to landlords who leave properties empty.
2) We’ve got dedicated benefits advisers employed by the Council who can help people navigate the minefield of benefit changes.
3) We’re doing everything we can to ensure our discretionary housing payment is used to help people who are struggling.
4) We started talking to the local Citizens Advice Bureau (CAB) as soon as the Welfare reforms were announced to see how we could work together to support the people who will be affected. As part of this, we’ve blocked payday loan sites from all council computers, in our offices, in our libraries and in other council-owned buildings.
5) We’ve invested in our local credit union, Kingston Savers, which is working hard to put payday lenders out of business.
6) And finally, we also keep in touch regularly with the CAB through our Kingston Welfare Reform Board, which works to coordinate support for individuals affected by Welfare reform.
It took us a while to come up with a robust process to block payday loan sites and other councils looking to do the same should keep an eye out for the pitfalls.
New sites are popping up all the time and unless you’re going to block all financial services from your system, keeping on top of all the new payday lenders and their changing web addresses is a tough job. So, at Kingston we’re putting a procedure in place with the CAB to ensure we regularly update our system to block new sites.
This is particularly important because more and more people will be using these computers to make benefit claims online and could easily be tempted to take out a loan to tide them over.
It affects us all
Recently, I was speaking to someone from Kingston Savers who told me the story of a man earning £60,000 a year, who had managed to get himself trapped paying off £4,500 a month in payday loans. In his case the credit union were thankfully able to step in and consolidate his loans. But it’s easy to see how even people on high incomes can get themselves into trouble through payday loans.
This isn’t a problem that we’ll overcome easily. Payday lenders aren’t going away, but as leaders in our communities it is our duty to work together to do more for those people in real need. It’s all about working together to build strong partnerships that can help ensure short term debt doesn’t become a long term problem for people in Kingston.
And if we can couple that with building a stronger economy and fairer society that will help everyone get on in life, we might finally get these payday lenders and loan sharks out of our communities.