The nanny state is on overdrive, with the Financial Conduct Authority threatening payday lenders that they are under its watchful eye.
Apart from the unnecessary threat, it seems very much like the authorities are responding to another tabloid agenda.
Of course, payday lenders have been created to meet the needs of those many people marginalised by the high street banks.
Beyond the fog, the real issue is not the exorbitant interest rates that payday loan companies charge, and they are undoubtedly exploitative; what is more important is that in Britain, in 2013, people are forced to go cap in hand to these companies for loans to meet their subsistence needs.
So, instead of saving souls and preparing us for the afterlife, we have an activist Archbishop of Canterbury who has appointed himself as advocate in chief for the anti-payday loan companies.
Of course the people who use payday loan companies as a reserve bank account are vulnerable, in much the same way that a small business depends on an overdraft facility as cash flow.
That is the reason why a civilised society has developed a social safety net to catch those who fall of the winner/loser social merry go round.
However, when we see people on state benefits being kicked from pillar to post like political footballs, bullied by the national and local state, then we have to ask ourselves serious questions.
Of course, we have a right to be judgemental as taxpayers, but if given a chance would we treat our brothers and sisters, and neighbours and fellow citizens as if they were from Mars?
The fact remains that our civic and religious leaders and the semi-state custodians are showing an authoritarian streak which is often unpleasant.
They are responding to a populism which reflects the worst and darkest side of our society.
We can broadly divide up the payday loan market in three: the desperate poor, such as single mothers trapped on council estates and dependent on benefits to survive from one day to the next; irresponsible young men and women, quite often in jobs, but who just lack the self-discipline to defer gratification and live within their means; and those simply incapable of managing their wages.
Two sets of these people can, and should be helped: those trapped in abject poverty in social and often physical isolation, and those badly in need of urgent financial education.
Those young men and women who want to live beyond their means should, in my view, be allowed to suffer until, through experience, they learn the hard way.
The reality, of course, is that most payday loans go towards putting a hot meal on the table for parents and small children, according to the pressure group Christians Against Poverty. Maybe the Archbishop should have a word with them and the rise of food banks.
The proposed affordability check on borrowers are just a precaution, since the vast majority of people approaching a payday lender are likely to have credit defaults registered against them and, by definition, would fail any objective affordability check. From The Times to the New Economics Foundation, there is growing evidence of the increasing wealth gap, growing poverty in one of the most successful economies in the world.
Those of us who see the elderly and destitute scavenging for food in some of our most expensive food and veg markets know the extent of real disadvantage in society and are left to wonder why the state should pick certain targets and leave others to continue on their merry way.
The other gateway for payday lenders is the small business sector, abandoned by the high street banks in the most arrogant of ways.
If payday lenders enter this space, and one or two have already, then the custom is theirs to lose, rather than the banks to re-gain.
We have reached a sorry situation when the Bank of England has to step in to advise a building society not to cut lending to small businesses.
What we urgently need is tough regulation of credit reference agencies, which hand in glove with their clients, drive people in to the hands of sub-prime and payday loan lenders.
The proposed restrictions on roll-over loans maybe a sledge to crack a nut. Will similar restrictions be placed on banks and building societies?
Martin Wheatley himself admitted: “We believe payday lending has a place; many people make use of these loans and pay off their debt without a hitch.”
I am from a generation, and as a former public sector worker, if briefly, which believes that civil servants should be dignified and above the chaotic noise of the rabble.
But, when we get senior public servants talking the language of the East End, about people being ‘afraid’ and putting legitimate businesses on ‘notice’, it smacks of the worst behaviour heard on the streets of Brixton and Moss Side.
If the City regulator thinks payday loan firms are out of order, with their extortionate fees, then quietly take steps to rein them in.
In the final analysis, at some point financial regulators will wake up and smell the coffee, that in the main we are adults of sound minds capable of making our own mistakes.
This is what democratic freedom is about, making choices within the parameters of decency and legality; it is not for the state, under any guise, to want to hold our hands from the cradle to the grave.
Hal Austin is editor of Financial Adviser
