Thursday, 1 November 2012

Pay-day loans - the scandal of silence

Lord, who may live on your holy hill?” asks David in Psalm 15. Answer, the one whose walk is blameless, who does what is righteous and, tucked away at the bottom, “He who lends his money without usury” (v 5, NIV).
That little word ‘neshek’ is one that ought to be written large over our Western culture. Indeed it may turn out to be its economic epitaph.
Simply, it means ‘charging interest’, which is of course at the basis of modern capitalism. In Mere Christianity, C S Lewis pointed out that our economies were therefore based on something which, until the end of the medieval period, all Christian traditions had taken to be a sin. Whilst admitting that he was no economist, he said it would nevertheless be remiss of him not to make this observation.
Personally, I think we now know how right he was. An economy driven by interest charges is fatally flawed. Furthermore, it seems to me Jesus also had this ‘traditional’ take on economics.
In the parable of the talents, the master says to the man who accuses him of reaping where he has not sown, “then you should have put my money on deposit with the trapezites” — according to the Greek English Lexicon of the New Testament a broker or banker who ‘exchanges money for a fee, and pays interest on deposits’. In other words, he should have lent to someone as grasping as he makes his master out to be.
Some still want to argue that the Bible is not opposing ‘sensible’ or ‘business’ loans. Personally I doubt that, but whatever one’s view there is surely something utterly scandalous about the increasing proliferation of so-called ‘pay day loans’. Our television screens are full of their adverts, and that alone surely indicates a booming business. With a typical repayment rate of over 4000% (that’s right, four thousand per cent) they surely qualify by anyone’s standards as ‘excessive’.
Furthermore, it is not just the desperately poor or the economically ignorant who are falling victim to what is basically a scam. In today’s Daily Telegraph, a reporter writes of her experiences with just such a loan, pointing out that with the so-called ‘credit crunch’, banks and other lenders are being urged to be cautious in the loans they offer.
Her conclusions are hard to dispute:
“Legal loan sharks have simply stepped in to the breach, devoid of proper regulation that might provide a cap on lending, and now, worst of all, this Government is actually cosying up to them. As was revealed in The Daily Telegraph a fortnight ago, Wonga executives attended the recent Conservative Party conference and paid £1,250 a head for face-to-face meetings with ministers from the Treasury and the Department for Business.
Instead of financial lessons about loans being learnt, it feels as if the normalisation of debt is close to being complete. You never hear anybody talk about “saving up” any more, unless it’s for a house, and even then that process is only in place so that you can take out a whopping great loan. Entire lives and lifestyles are still built on credit, and it is seen as uncontroversial that one of the Prime Minister’s closest employees goes to work for a company that has been investigated by the OFT.”
This makes me angry. I hope it makes you angry too. Every time I see a ‘Wonga’ advert, I want to throw up. And every day there seem to be more such companies. Yet the Church, along with society as a whole, seems to be strangely muted in response.
This is not a case of wanting the Church to leap on a crusading bandwagon. Nor is it the traditional call for the Church to attack the profit motive. It is about the exploitation of the poor and indeed the spread of poverty. If the directors of these payday loan companies are getting rich, we know exactly at whose expense they are doing so — the poor sap who thought they could pay for that car repair or that little treat for the kids by taking out just a little extra.
In my book, payday loan companies and heroin dealers are not that different. They both relying on getting the needy client hooked and then milking them for all they can.
In God’s book it is already clear where they stand — and it is not on his holy hill.
Please give a full name and location when posting. Comments without this information may be deleted. Recommend:


  1. The problem lies not only with the banks: it lies within the mechanisms of government. There is a simple inequity in the fact that when a benefit recipient's circumstances change, payment is stopped immediately and entirely for recalculation, but resumption of payment may take four to six weeks. In many cases the recipients are the very people who have the least to fall back upon - so where is there to go but to the likes of Wonga and Cash Converters?

  2. This comment has been removed by the author.

  3. APR 4000% loan over 1 to 3 years £1000 borrowed.

    0 1000
    1 41000
    2 1681000
    3 68921000

    By the end of year 3 they would owe 70 million!

    By the 10th year they would owe. £300000000000000000

    £300000 trillion! More money than in all the bank accounts of the whole world.

    More realistically borrowing for just a month would incur interest of over £3000.


  4. One of the arguments that people put to me in favour of Gay marriage, Women in the priesthood etc is that of the Church now allowing Usury, when once they forbid it.

    So it is time a rethink on Usury? The world would still go on even if we did not change interest…

    Why not?

    The Church to lead the way?


  5. Obvious thing to say, but the problem is in the human heart. It's been pointed out that the 10 commandments are booked ended by the 1st and 10th. No God before the Lord, no coveting. But we have many gods and we covet many things.

    Like John's article said, who saves up these days. I've been asked before, "well what do you do if you loose an essential, like a TV?" They thought I was weird when I said, "we have, twice, it's not essential, we just had no TV until we felt we could buy one, then it's ours, outright". Same when people offer me insurance on everything I buy. We fear lose and doing without.

    Having worked in churches at the richer and poorer end, I've notices the same problem greed. People say, "why shouldn't I have an iphone AND a new-ish car AND a posh holiday" - simple answer, you don't earn enough tough, live with it.

    All the blame going on bankers and government isn't quite fair, without greed in the general population, there would be no demand for these suicidal policies.

    If it were harder to borrow, people would have to save up and be creative about trying to make money. That would be good all round.

    I'm sure Phil is right. The Church should lead the way. We need to challenge Christians in banking and business to show a better way too.

    Darren Moore

  6. Well said Revd John! I think this is a far greater issue though, and not just something to do with pay day loan companies, but a general attitude to money and its uses. (And probably impacts on family life, far more than many of the other 'bogie men' blamed for eroding family life...)

    But I don't think you'll see the same effort and support mustered on such a topic even among conservative Christians as you'll find is applied to certain topics (which seem to hover below the waist line and concern convenient minorities and ancient prejudices). The trouble with issues around money is that it concerns everyone and a good deal of self-interest... So can't see it being a runner as the real 'hot' topics tend to be around 'righteousness' that affects (because of the simple maths of demographics) others rather than many of our more vocal conservative friends...

  7. Peter, whilst I understand your concerns, I would just point out I don't see much about this topic on Thinking Anglicans (which seems to 'think' that justice is about women and the episcopate - and same-sex relationships) or Fulcrum (ditto and querying conservative evangelical views about that and same sex relationships). Of course, I'm also saying I don't hear anything from our hierarchy either.

    I'm no expert on this topic, but it would be my intention to raise it our next Diocesan Synod. The problem is, it is too late for Saturday and the next one doesn't come until March. On the other hand, at least that gives me time to get some ideas togetherr.

  8. The "4000%" APRs are pretty unrealistic. In practice, these loans are for 1 month and typically carry a charge LESS than going overdrawn unauthorised.

    That said, I know speaking to colleagues in my firm that we haven't worked with any pay-day loan companies and I'm not sure if we're chasing any business from them. The problem is often not so much with the original loan, but the way it and the fee are rolled over month by month.

  9. Oh and in case anybody was in any doubt, that's not an official position statement from my firm, just my impression talking to colleagues.

  10. Peter Denshaw

    On the face of it you are right. The misery of interest is on the face of it a greater threat that homosexuality.

    Both are wrong and you are right the church should be clear about this.

    There is something subtle and big developing. Where is will lead I am not at all sure, but for many the results already seen are not good, but I feel sure we have seen nothing yet.

    This is worth watching if you have the time

    It is a long video, mainly about other changes in society, but the christian response that is suggested in the last few min is spot on and the only realistic option.