Monday, 23 August 2010

The Tallyman Cometh

I just got an email from Compass Online telling me about their campaign to put a cap on the rate of all forms of credit. In reality it's an attempt to protect the poorest members of society from what's become known as legal loansharking. This is where short term loans are offered with a very short repayment period ( which is why they're also known as payday loans ) which also have incredibly high interest rates which kick in should the loan not get repaid on time.

A noble cause I'm sure. But who is this going to benefit?

Let's look at why people use these services. In fact go back maybe a hundred years and you would find the same practices going on. In fact you would find this going on as long as our society has been going down the road of consumerism. There is a need within all of us to belong, to be part of something. In our society it expresses itself in conformity or a desire to share in goods or services, many of which aren't essential to life but promise to lift us out of the doldrums of poverty, albeit for a short time. So, many years ago people would use the tallyman to obtain what they needed or desired. And they used the tallyman because they had been disenfranchised from consumerism by circumstance, society and the banks. They didn't earn enough to buy direct, they didn't earn enough to get an official loan from the reputable banks so the tallyman appeared to fill the need. Offering money or goods he met the need of the people where reputable society wouldn't.That's not to say the reason of the tallyman and the organisations behind them was pure. There was a profit, albeit at a higher risk, hence the high interest rate. So you needed school uniform for the kids? Just get the tallyman to call.

I don't know if we still have the tallyman in England but their position has certainly been taken by the payday loan industry. It exists because it meets a need among the poor and dispossesed. And if you legislate out such an industry without having something in place to meet those needs then I would suggest you do more harm than good. There is intense pressure on people and parents to live the lifestyle or to get the 'latest' for their children and they will turn to whatever is there. It's no good pontificating on the evils of the system without offering an alternative. People will find alternatives, opportunists will find ways to meet that need. And you can bet they will be worse than the payday loan industry. Interest rate caps on loans would hurt the poor and vulnerable in society whilst warming the cockles of the capitalist.

So back to the question, But who is this going to benefit? I would suggest that it will be the consciences of the metropolitan chattering classes.