Sunday, 15 August 2010

Payday loans are another reason we need to revive community mutual aid

No doubt, everybody's seen the adverts on the high street. The Money Shop is a particular culprit: "Need extra cash for life's little emergencies? Get up to £500 instore or online. Pay it back next payday." 

It's a con, of course. Because whilst it may help you out in the immediate term, your next pay check is up to £500 short before you've done a thing. No long-term payment plan, no way out, just cough up the cash ... and get a new payday loan when you inevitably come up short next time.

It's our economy in microcosm, except there's nothing "micro" about the interest.

But, says BBC News, "1.2 million people are now taking out a payday loan every year, borrowing a total of £1.2bn." This is because "if the money is paid back promptly on the next pay day, this type of lending can be cheaper than paying an unauthorised overdraft or a credit card charge."

But, as already stated, "if the loans are rolled over, debts can quickly escalate;"
Dressmaker Stephanie Derby from Finsbury Park in London took out a pay day loan after she fell behind on rent and bill payments. 

She was already overdrawn and at her limit on her credit cards. 

''I didn't feel I had any other option, I had just graduated and all my debts were mounting up, it really was a last resort," she said. 

"I borrowed £400 hoping to pay it back a few weeks later but I was unable to. 

"Each month it cost another £56 to renew the loan and after six months the initial loan of £400 ended up costing me nearly £800," she explained.
Some (I'm thinking of the Devil's Kitchens of the world) may say this is her own fault. After all, she had the "choice" to take or leave the loans. She could have "chosen" to live within her means, or "chosen" to default, or "chosen" to take a job where she could afford to pay back the debt with ease.

Except, of course, it's not that simple. We live in an economy based on credit, with ordinary wages at a level where living within your means for many is barely surviving.

If you want to shake off the shackles of wage slavery and go into business for yourself (as the faux-libertarians of the right insist everyone has the freedom to do) you need credit. Which, of course, comes from people who'll be none too sympathetic if the market doesn't work in your favour.

However, the solutions offered by the consumer groups quoted in the article are weak at best. They want "flexibility" from more traditional lenders, who could "do more for their most vulnerable customers."

The basic presumption of capitalism and the credit economy go unchallenged. But this is as you might expect from groups which exist to defend "consumers" rather than working class people being taken for a ride by an inherently unequal system weighted towards wealth and privilege.

The credit industry is, after all, just a loan shark with legal licence. That it uses bailiffs and CCJs rather than "the boys" and a two-pound claw hammer is by-the-by.

For a real solution, we need to reinvigorate community mutual aid as a challenge to predatory lending. Credit unions are just one example of this in the present. Alongside community organisation to resist the bailiffs, the landlords, and corporations buying up our land, they allow us to defend ourselves as a class from the vultures of capitalism.

Not only that, but it will put the ruling class on the back foot and set us on the path towards genuine libertarian communism.