Written by Econintersect Guest
— this post authored by Richard Murphy, Tax Research UK
Eighteen years ago the Debt on the Doorstep campaign began to tackle extortionate costs imposed by non-bank lenders in the UK market.
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As the campaigners for this noted when winning a cap on interest rates a decade later:
The lobby was followed up by a report from Richard Murphy, arguing the case for an interest rate ceiling, based on a forensic analysis of the business model of Provident Financial, and concluding there was prima facie evidence of market failure in the sector.
That report now seems to have disappeared from the web. I have republished it here.
Now comes news that Provident Financial, the subject of that report, is withdrawing from the home credit market. It supplied loans of a few hundred pounds at a time, albeit at extraordinary cost.
I continue to have little regard for the business model of financiers like Provident Financial. But there is a problem now they and Wonga have left the market, and that is in some people accessing credit at all.
It is vital that those on low income with low or no savings have access to credit. The unforeseen can happen to anyone. Being able to replace white goods is, for example, vital to well being, and local authority funds that once made this possible have now all but disappeared as far as I am aware.
I am delighted by the end of exploitation, but not by the removal of credit facilities. A compassionate government would recognise what us happening here as market failure and would examine how state backed lending linked to the benefits system could correct what is a very obvious market failure. The cost need not be significant. The social benefit would be high.
The question is, where is the government?
And the Opposition come to that? Why isn’t it in this space, proposing real change for people who need it?
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