At the Norwich City Council meeting of 24th September 2013, I proposed a motion as follows:
Council RESOLVES to ask the cabinet, where the law so allows, not to :-
(1) permit council assets or facilities to be used for advertising by ‘payday loan’ companies; or
(2) use external facilities where ‘payday loan’ companies are advertised, for council services or events.
Here’s what I said in my speech:
“I was pleased to find, two Fridays ago, that Norfolk County Council Trading Standards were distributing funds recovered from loan sharks to community projects looking to tackle those illegal operations through raising awareness and promoting the alternatives.
“The Lord Mayor himself presented the grants to the eight projects which were voted most worthy by members of the public.
“The choice of which projects to vote for, I can assure you, was not easy, as all the projects were more than worthy and I spent some time talking to representatives from each about what they would entail. In the end, I chose a particular project which not only wanted to educate about the folly of high cost loans, but also to promote the local, low-cost alternatives to environmentally damaging material consumption – certainly in line with Green Party values.
“However, one of the legal alternatives to loan sharks is hardly better. So-called payday loan companies frequently charge interest rates of over 4000% APR. Just to put that into perspective, if I had taken out a loan of £100 three years ago today, and failed to pay it and the interest back, at Wonga’s interest rate I would now owe over seven and a half million pounds.
“These types of loans can blow the value of credit out of all proportion to the capital sum. In 2012, Wonga lent out £1.2 billion pounds and had a turnover of £309 million, suggesting that 1 in every 4 pounds paid back by their customers goes on interest, and a large proportion of that interest goes on profits – Wonga’s profit was £84.5 million for the same period.
“And to make sure that they keep on avoiding the truth about how expensive their loans are, payday loan companies spend disproportionate amounts on advertising, which the chief executive of Citizens Advice described as “a slap in the face” for their customers. The top five payday loan companies spent a whopping £36.3 million in the 12 months to June 2013. That is more than some larger high street banks with many many times the turnover.
“Whilst we cannot prevent legal loan companies from going about their legitimate business, however morally suspect that may be, we as a local authority ought to be doing all we can to protect those vulnerable to excessive debts by not facilitating the advertisement of these kinds of loans and instead encouraging those in financial difficulty to use more reasonable alternatives or seek financial advice. There are already a number of credit unions that serve Norwich, which offer short-term loans with interest rates at around just 12.68% and, despite having their general advice service cut, Citizens Advice do still offer debt advice to those in need.
“And of course we have the projects I’ve already mentioned, which will be all the more successful if they don’t have to compete with continual distraction by payday loan companies’ own advertising.
“So I hope members will support this motion, and send a clear message about the moral position of this council to payday loan companies.
“Thank you.”