Last week I had occasion to visit one of the poorest parts of Britain known to me. I have been to other, much poorer parts of the world, of course, but somehow the poorest areas of England are to me the most dispirited and dispiriting. Short of famine and epidemic, almost everywhere else seems almost thriving by comparison.
At a bus stop, I noticed an advertisement for a loan company. It made loans of up to £400 to the local people. What the advertisement said spoke unwritten volumes about the economic state of the local population:
FAIR: Our prices are fair only covering the cost of delivery
of our services to the local community.
AFFORDABLE: We are cheaper than expensive doorstep
lenders and high street money shops we save you
TRANSPARENT: As an ethical lender we are open about
our costs and provide financial services for your
SERVICES: We pride ourselves on understanding your
needs, our services are designed around you.
I will refrain from literary criticism of these statements, and refer only to the fact that a loan of £400 was to be repaid at the rate of £10.07 per week over 52 weeks, that is to say a rate of 44.55 per cent per annum. If this is cheaper than the rates of other lenders, what rates must those lenders be charging, and how desperate must people be to take out loans on such terms?
I was surprised to discover that the loan company that charged ‘only’ 44.55 per cent was in fact a non-profit organisation in the public sector. Two thoughts occurred immediately to me. Interest rates had to be as high as they were because of the incidence of default by people who took out such loans; and the organisation, though it claimed it did not make a profit, paid a bloated staff from the interest it collected. These two explanations are not mutually exclusive.
Our modern form of existence de facto obliges all kind of sumptuary expenditure – on mobile phones, cable television etc. I could not help but notice that next to the advertisement for the loan company was one for a night club, where groups, or disc jockeys with names such as Pitbull, The Vampire, Neon Jungle and Loveable Rogues, were appearing. Could it be, I wondered, that modern popular culture is the cause of much resort to loan sharks, even publicly-funded loan sharks?