Loan sharks prey on poor people while the government protects them. In 1987, the BBC show Panorama looked into loan sharks. Tony Blair, who was the Labour Party's city spokesman at the time, said on the show: "You need some control and regulation to make sure that dishonest people aren't lending money to people who can't pay it back."
Even though Blair has been in power for 16 years and won two elections, there is still no sign of this rule. But it's not just the shady loan shark down the street who lends money to poor people at very high interest rates. Sub-prime lending is a big business worth millions of pounds. Not only has Labour failed to stop the lenders who take advantage of the poor, but the party has actually invited them to its conference, where they pay for the platforms that government ministers speak from.
Last year, Robin Ashton, who is the head of Provident Financial, made $408,000. His business made 82 million dollars. The Provy makes money by giving loans to poor people through agents who go door-to-door. More than 1.5 million people in Britain borrow money from the company. The annual percentage rate (APR) of its interest is about 177%. The company says that these high fees are fair because it takes a risk by lending money to people who aren't accepted by high street banks and because it costs money to pick up cash on the doorstep.
The people in charge of Labour don't think that Provident Financial takes advantage of the poor to make money. Matthew Taylor, who is in charge of policy planning for Blair, praised the company, saying, "We often see negative reactions to Provident Financial that come out of the blue." After seeing what it really does, these reactions don't make sense. Policymakers can learn a lot from how it works to give people what they want. Provident Financial has relationships with many of its customers that the government can only dream of.
Taylor is also the head of the Institute of Public Policy Research (IPPR), which is a think tank for the New Labour party and is partly funded by Provident Financial. And the government did learn from Provident Financial. They no longer give emergency grants to people who get benefits. Instead, they give them loans from the Social Fund that they have to pay back. But because it's hard to get these loans, many people have to go to subprime lenders.
The company also gives money to the Social Market Foundation and the Foreign Policy Center, which are both New Labour think tanks (FPC). In September, Gary Titley, who is the leader of the Labour Party in the European Parliament, spoke at an FPC meeting that Provident Financial paid for.
London Scottish Bank is another national company that gives doorstep loans to low-income people with APRs of about 160%. This helps London Scottish earn about $17 million a year. Roy Reece is paid $307,000 a year as the CEO. The company makes more money because it owns a debt collection agency called Robinson Way. Trevor Furlong is the chairman of London Scottish. He used to be the CEO of Mersey Docks, which was at the centre of the long and bitter Liverpool dockers strike.
Some of the worst loans for people without status are those that are secured by their homes. First National Bank, which is owned by Abbey National, also gives loans to people with bad credit. Many of its loans are second mortgages, which means that people who don't pay them back could lose their homes. Abbey is in the process of selling First National, which will put Chairman Tim Ingram out of work. But his $1.6 million redundancy check means he won't have to borrow money from people on the street.
Both London Scottish and First National are members of the Finance and Leasing Association (FLA), which is a lobbying group for Britain's store card, car finance, and personal debt businesses. Consumer debt is clearly important to the government. At the recent Labour Party conference, consumer affairs minister Gerry Sutcliffe talked about it at a Social Market Foundation meeting paid for by the FLA.
