Anorak News | Does Margaret, Lady Hodge, know anything about payday loans? Not much

Does Margaret, Lady Hodge, know anything about payday loans? Not much

by | 3rd, June 2013


DOES Margaret Hodge know what she’s talking about?

The Public Accounts Committee (PAC) has accused the watchdog of failing to properly regulate or even understand the burgeoning market. The OFT has instead been “passively waiting for complaints from customers before acting”, the MPs said.

Margaret Hodge, chairman of the PAC, lambasted the OFT’s regulatory efforts claiming it has “never given a fine to any of the 72,000 firms in this market” and has “very rarely revokes a company’s licence”,

This is all about payday loans. And you and I, sensible people that we are, might conclude that if there’s no licenses being pulled then there’s no companies doing things that would require licenses to be pulled. You know, this novel idea that people might actually be obeying the law?

But the incomprehension goes further:

Ms Hodge added: “It would be a big step forward if consumers were given straightforward information on just how much loans are going to cost them. We would like to see the misleading APR rules ditched and replaced by a legally required statement of the Total Amount Repayable in cash.”

But if you do that then how can you rail against the payday lenders demanding 4,000 % APR?

Borrow £100 and pay back £120: that would be the total amount repayable idea that people do indeed understand. But when you crank that up into an APR that’s an APR of over 1,000% (without taking compounding into account). So if you ditch the idea about APRs, then how can you run a campaign screaming that the payday lenders are ripping people off with vast sky high interest rates?

Which is, of course, the campaign that got us into this discussion in the first place.

I rather expect Lady Hodhr to row back on that particular proposal: as it will be deemed most unhelpful to campaigners like her fellow MP Stella Creasy. The problem being of course that Hodge doesn’t know what she’s talking about.


Posted: 3rd, June 2013 | In: Money Comment | TrackBack | Permalink