MS Leader: Payday loans need action

It was great to hear last week that the government is looking at regulating the payday loans sector.

Since the downturn first struck, this has been a ballooning segment of UK financial services.

Many poorer areas of cities up and down the country are now covered with payday loan branches. If you’re a fan of daytime TV you’ll have no doubt noticed the large numbers of payday firms that now advertise their services.

Of course, it’s not the ubiquity of payday lenders on our high streets and flat screens that has got people concerned, but the shady practices employed by some of them. Clearly they provide a service and a potential lifeline for those in need of credit.

As the Labour peer and Consumer Credit Counselling Service chair Lord Wilf Stevenson put it last week: “The truth is that the people who earn least in our society have the most need to have access to short-term borrowing such as payday lenders so they can just get through the year.”

Just look at the mortgage market over the past five years – large swathes of the population are now effectively barred from it because of their credit history.

But that makes ensuring that this part of the market is properly regulated even more important.

Four of the trade bodies that represent the payday loans sector have come up with their own customer charter and members have until the end of November to comply with it. But with these products potentially used by vulnerable members of society,

should it really be left to mere self-regulation to police this product?

Ultimately the UK’s financial regulators have a nasty track record of being late to the party with new products and it would be regrettable if payday loans were added to this growing list.