In the past you could rely on your friendly bank manager to get you out of most financial scrapes. But in 2008 that all changed with the financial crisis and since then banks have all but ceased lending to both SMEs and individual members of the public. Even lending to finance companies was frozen for some time.
Could payday lenders have provided the answer?
Under these circumstances you could be forgiven for thinking that the emergence of payday lenders could have provided at least one solution. Indeed, had the market been properly regulated or even self-regulated by the use of best practice it should definitely have provided an answer for consumers.
Unfortunately, however, the payday loan industry turned out to be a greedy one, rather than a needy one, which inflicted rates of up to 5800% APR on what were on many occasions vulnerable customers. It is very easy to blame the lack of external regulation but surely the industry could have policed itself to at least work to best practice?
Peer to peer lending could have been the knight in shining armour!
Another possible solution to the problem of limited bank lending could have come in the form of peer to peer lending. But here too the model seems to have broken down or at the very least be heading for real trouble.
Peer to peer lending suffers from the same ultra-light supervision and regulation that is apparent in the pay day lending market. This is particularly worrying when one realises that some of it is actually facilitated by bank deposits and there are no investor protection schemes in place to protect the public. It seems that there will be more trouble ahead.
Should the public be able to turn to the price comparison websites for help?
In theory the answer to this is a definite yes but sadly the reality is somewhat different. If these sites actually did the job that they purport to do which is to accurately and fairly compare different deals then they would indeed provide an answer. Unfortunately, all too often we find that the various deals are listed according to the kickbacks the site is obtaining from its contributors.
Regulation is the key!
I think any reader will have recognised by now that there is one main core theme that is running through all of the above – regulation! The Government needs to do more to ensure that the public is protected from these sharp practices that often they remain blissfully unaware of! Whether that is provided by the FCA, which arguably has its plate already too full, or another regulatory body specially commissioned for the purpose is a question for Government. But what is clear is that something must be done and quickly!
I am a serial entrepreneur who has spent much of his life in the financial sector and in doing so I have become very knowledgeable about the sector. This experience has enabled me to become the founder of the Campaign for Fair Finance™ and my current venture, Fairmoney.com.
In my career I have started several lending companies and indeed I was instrumental in founding the non-prime motor finance sector, allowing people to afford to purchase a car who might otherwise been unable to do so.
My experience within the finance, and more particularly lending space, has afforded me the opportunity to advise the Bank of England, The Law Commission and the Treasury on various aspects of asset finance policy. Indeed I am currently assisting the regulators and some leading parliamentary figures to reform the UK credit and lending industries to create a fairer and more transparent environment.
At the same time, I also advise several charities and social enterprises on their financial and media strategies and help a number of exciting businesses across a spectrum of sectors and industries.
My experience within this industry sector has allowed me to become a media pundit and commentator on many consumer and particularly consumer finance issues and to become an ethical advisor to the emerging crypto currency and blockchain markets.