Payday Loans and Tom Jones

Let me share with you a quite-good Christmas cracker joke:

"Doctor! Doctor!  I keep thinking I'm Tom Jones."
"Don't worry...it's not unusual."

It's also not unusual to be skint after Christmas because it's an expensive time. 

If you are an employer, this really affects you. 

If a household is sailing close to the wind, Christmas can move it into trouble.    The person who earns the income for the household will reflect on how hard they work and how they never seem to get ahead financially.   

Their thoughts immediately turn to how much money they earn.    That's where the income comes from - so it's natural to go directly to the source.   Indeed, many well-meaning personal finance commentators advise to "negotiate a pay rise" as the first basic step to get financially sorted.

So then the next thought might be a pay rise request.    Or they may even start to look around for a better paid position elsewhere. 

If the need is a bit more immediate than that, their next thought may be to approach you for an advance on pay.    This is very, very common (i.e. it's not unusual).   The employer doesn't usually charge interest and there are no forms to fill in.

A lucrative money lending industry is booming on the back of this.  Payday loans, cash now, can'twait dot com.   On a TV ad last night,  I even heard the slogan "where to go, if the boss says no!".    I think this is unbelievably irresponsible.   Let's remember that these companies charge at least 500% a year in interest - and much, much more if repayments are missed.   Yes that does say 500%.  Five hundred per cent.

If you are an employer, this really affects you.   I know I am repeating myself - but it really does.

As an employer, you will sympathise with your employees - but a household that is in financial distress is not caused by how much you may pay them.    But you can help them.

Have a Sorted session at work about managing debt.    You can do it yourself, or I can do it for you.   

The information given at a Sorted session shows people what to do and where to go if they need some help.     Most of the time, it is getting people back on course.  Non-preachy, jargon-free and nobody is trying to sell them anything.

The sessions give people hope and show them that you are on their side.         
 

Can you lend me $100?

I promise I'll pay you back as soon as I can...

Thanks!
 
Let's fast forward several years.    You bump into me in the street.   I am dressed as a woman, I have a wig on,  I have changed my name and I am affecting a limp.    Yet you still recognise me (dammit)  and ask for the $100 back.  

In my new Jamaican accent, I deny everything because I am weaselly, oily ratbag who cannot be trusted with other people's money - and besides,  I'm called Glenda now.   I also know it will cost you a lot more than $100 to prove that I actually owe you that money.   So you give up.  One-nil to me.

Let's be under no illusions, the finance company collapses have followed this broad narrative arc.  

The good news is that there have been several successful prosecutions, and I think the regulators are winning the battles that they can win.   But when they have to walk away, there is an empty, impotent feeling of disgust that no-one is held personally accountable.

These people rely on the protection afforded by setting up entities/trusts and whatnot to legally separate and de-personalise the financial risks they take, if it all goes wrong.   When it works, it's lollies ahoy for the people involved, personally.    But when it fails, it is the entity that fails, not them personally.

Sorry for the language, but these wankers destroy successful companies, spirit away people's life savings and damage the fragile reputation of the financial services industry, which is actually full of sincere and well-meaning people. 

This feeling is bad enough when it's only about money.   How must the Pike River families feel?   

Things must change.