Ever vilified in the press as the unscrupulous and immoral counterpart to larger, more legitimate lending businesses, payday loan companies have once again come under fire as several county councils announce plans to bar them from advertising on city-centre billboards nationwide.
The move, which has been championed by councillors from Plymouth, Medway and Cheshire east, comes hot on the heels from an announcement by the financial conduct authority, which promised to ban firms like wonga.com or 1st Stop from advertising at all after 2014. But the question is, are these measures really fair?
For the most part, the grievances levelled at payday loans companies are that they appear to charge ‘immoral’ interest rates or, worse still, that they deliberately disguise their sky-high charges in order to emphasise the speed with which their loans can be secured, but most are equally as forthcoming as the big banks.
These loans are also obviously filling a market niche, and a question raised by a recent article from the Ludwig Von Mises Institute is interesting: what would the desperate few who depend on a quick cash injection do without the opportunity to borrow extra for bills? And is it really fair to artificially cap the only industry willing to lend small amounts of credit to high-risk earners when they might depend on it to keep bailiffs from the door, or to put food on the table?
We also have to consider the fact that such companies probably wouldn’t exist if it wasn’t for the worsening economic crisis, which was in part instigated by the large banks. According to the National consumer council, the number of payday loans being withdrawn through payday loan schemes has quadrupled in the last two years alone and, unsurprisingly, the majority of people withdrawing these loans have incomes below £25,000.
So, while payday loan companies might have a bad reputation in the press, it's often unfair to claim that they are not upfront about the cost of borrowing. They do also fill a genuine need for those people who do not have enough money to bridge the gap until payday. Is it really fair that these companies are not being given the same chance as other financial institutions?