Payday Loans and debt slavery

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“Debt, n.  An ingenious substitute for the chain and whip of the slavedriver.”  Ambrose Bierce (The Devil's Dictionary, 1911)

News

Britain’s Office of Fair Trading (OFT) has referred the entire payday lending industry to the Competition Commission, based on a recent review.  The value of the industry has spiralled from £900 million in 2008/09 to £2.2 billion in 2011/12.  Up to 2 million people currently take out these short term cash loans to make ends meet, at interest rates of typically 25% per month.

 

When made and accepted responsibly, payday loans can be an alternative to unauthorised overdrafts for urgent cash needs.  However, 28% of these loans are not repaid at the end of the month but are rolled over, when the costs start to spiral.  Loans that are rolled over – often because borrowers could not afford them in the first place – provide almost half the total revenues of the industry.

Part of the OFT’s criticism is on how payday loans are sold – emphasising the speed and simplicity of getting cash, rather than the costs and risks involved.  Only 74% of lenders run affordability checks on new clients; the figure falls to just 23% in the case of extending a loan.  This suggests that lenders may not rely so much on prudent lending to ensure high repayment rates, but on their debt collection methods.

Another major criticism by the OFT is that many of the organisations actually making the loans are concealed behind intermediary companies, agents or brokers.  Borrowers have to reveal all their personal details, including mobile phone number, email and address, while the actual lender remains obscure.  This relational distance is part of the reason why the number of complaints against lenders has increased 10 fold in the last 4 years.

It is an indictment on our society that we allow the normalisation of business based on exploiting people’s naivety, hardship or desperation.  Unmanageable debt is a major cause of mental health problems and relationship breakdown.  Debt carries a relational as well as financial cost; alleviating it warrants both kinds of response.  

Read on…

An offshoot of the Occupy Campaign in USA is an imaginative project to buy up a bundle of unpaid medical debts for a fraction of their face value, then cancel them.  Read more about the Rolling Jubilee initiative here.

Walk the talk

There are a growing number of charities that help people manage their debts – providing relational support as well as financial advice.  Could you do something to support one in your area?

The last word

From the Bible, Proverbs 22 verse 7: “The rich rule over the poor, and the borrower is slave to the lender.”

Magnetic Mandela

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“Do I not destroy my enemies when I make them my friends?” Abraham Lincoln

News

Despite having left the South African presidency in 1999 and stepped out of public life nine years ago, the ailing Nelson Mandela is still a central figure in South African politics and society.  Not because he may hold some power behind the scenes in the ANC, nor because he intervenes in political affairs.  Rather it is due to the extraordinary relational footprint he has left in the nation.

The history of South Africa over the last 20 years could have been very different had Mandela not been such a remarkable leader relationally.  Despite the inhuman conditions of Robben Island prison, Mandela treated his captors with courtesy and respect, to the point where some felt they were more like Mandela’s guests than his jailers. 

Following his release he engaged with the white government leaders with dignity and courage, which slowly won their trust and allowed a passage towards peaceful elections.  Mandela could so easily have been driven by bitterness, resentment and anger which could have led the country towards showdown and civil war.

Other stories are still being told of how Mandela gained the loyalty of the white elite by keeping the same security staff in the presidential palace after coming to power.  The film Invictus tells how he earned the trust of the wider white population by embracing the Springboks – who epitomised Apartheid – and enthusiastically supporting their successful bid to win the 1995 Rugby World Cup.

Mandela’s domestic life was more troubled, and his first two marriages ended in divorce. Nevertheless, his remarkable accomplishment of uniting South Africans across racial and tribal divides, and leading them peacefully from Apartheid to democracy, explains the enduring influence which this frail 94 year old still exerts from his hospital bed – right round the world. 

There is a magnetic power in this remarkable person; no wonder no one wants to let him go.

Read on…

The trial of Nelson Mandela in 1964 led to his 27 years of imprisonment; read his remarkable speech at that trial, carefully documenting the grievances of the black South African population and the ANC’s strategy here.  

Walk the talk

Treating people who are prejudiced against you with dignity and respect can be transformative of the relationship; is there someone you need to respond to in the opposite spirit?

The last word

From the Bible, Matthew 5, verse 39: “You have heard that it was said, ‘Eye for eye, and tooth for tooth.’ But I tell you, do not resist an evil person. If anyone slaps you on the right cheek, turn to them the other cheek also.”