Parry Mitchell on the long and winding parliamentary campaign to regulate payday lending firms
There are many cynics around who claim that Parliament can’t change anything. But with a clear sense of purpose, a campaign that really matters, a refusal to take no for an answer and a wonderful team behind you, mountains can be moved.
It’s odd how these things happen. I had never given much thought to payday lending and I had barely heard of Wonga. Sure I knew about loan-sharks and I was fully aware that the illegal ones were pretty horrible. But the high street money merchants and the online payday lenders had passed me by.
My knowledge of Wonga came about socially. I know quite a few of the directors and shareholders of the company and I was curious to look more carefully at their activities. I couldn’t believe what I saw –that this company could be lending money on short term loans at interest rates which at an annualised level exceeded 6,000%. So I decided to adopt this issue as a campaign in Parliament.
I was in a unique position. My business background had been in the leasing of high technology equipment, as a result of which I understood two industries inside out. The first was finance and compound interest, the second IT – they both flow in my veins. It put me in pole position to refute everything the payday lenders (especially the online ones) threw at us, and believe me they scraped many barrels.
The campaign was brilliant. In the Commons we were lucky to have the irrepressible Stella Creasy and also Paul Blomfield championing this issue. Stella became the media face and how well she did it, not letting the payday lenders get away with anything.
I was also blessed with the support of our fabulous team of Labour advisors in the Lords who helped me every step of the way. They pulled me back when I was about to go too far and encouraged me when I was getting disillusioned. Their sense of tactic and political opportunity were key to the timing of the campaign itself.
Securing the support of the Archbishop of Canterbury was important. To be honest he didn’t need too much persuasion – it is an issue he cares passionately about, but without his help it would have been much harder.
But most of all I have to thank the payday lenders themselves. They were inept, their trade association did them no favours and their constant lobbying of me and many others only harmed their cause. I mean, can you imagine what idiocy it was for Wonga to increase its APR interest rate from 5,000% to 6,000% while all this political activity was going on? I had accused them of greed and avarice and they then stepped straight into the trap by proving it. Sometimes you have to wonder.
The Financial Conduct Authority (FCA) could have done more. At the end of 2012 my amendment to the Financial Services Bill had given them wide ranging powers to cap all charges that short term lenders can apply to loans (including interest rates). But the FCA went wobbly and gave the very clear message that they were reluctant to use those powers. The Prime Minister, the Chancellor and the Business Secretary were singing the very same tune that they didn’t want interest rates to be capped and the FCA simply picked up the mood music.
George Osborne changed his mind a few weeks ago, reversing the government’s position. They introduced an amendment to the Banking Reform Bill which now makes it obligatory that the FCA must cap interest rates and all other charges. And it gets even better: they will be required to get the Treasury’s approval on any changes.
So why the change of heart from the Coalition? Why the massive U-turn? In short it was politics. Osborne knew Labour was making the running in its determination to cap interest rates and he was well aware that the government were losing the argument. What better way for them to neutralise the issue than to adopt it as their own?
But most of all there was an overpowering sense of a grave injustice that needed to be righted. There are millions of our fellow citizens who use payday loans, and many of them get trapped in a vortex of usury from which they find it impossible to escape. If we have gone some way to making their lives just a little easier then it has made all the hard work worthwhile.
Lord Parry Mitchell is a backbench Labour Peer and a former Shadow Business Minister
Published 17th December 2015