It's hard to know what is most striking about the short-term lending sector – its spectacular growth or the savage criticism it attracts. Both are remarkable and, of course, inter-linked.
And while some of the criticism aimed at the short-term loan industry is justified, much owes more to financial snobbery than the facts. There is a belief that the only people who use our services are those who are either so desperate that they have no choice or completely unaware of how much repayments are going to cost them.
This is nonsense just as it is nonsense to use annual interest rates to measure the cost of a loan which, in our case, is to be repaid in 18 days. You would not guess it from some of the more lurid headlines about modern day loan sharks but charges for a small loan – which is what is offered – can be considerably less than people pay by going over overdraft limits with their banks.
Far from people being financially naive to borrow this way, they are financially savvy.
Nor is it true that charges are hidden. Unlike the banks, we pride ourselves at MYJAR that our small print is in big print. Customers know exactly what they are going to pay for a loan.
Short-term lending is meeting real and growing demand. More than 5 million British adults are expected to use a short term loan this year, and short-term lending is now a £2.1 billion industry, the market having more than doubled in size over the past three years.
It is also sadly true that too many companies have done too little to stop their customers being sucked into a spiral of debt. Large sums can be lent when there is no obvious way of it being repaid. Consumers can be encouraged to take out new loans to repay existing ones. It is why the Government is absolutely right to bring in regulation to protect consumers by clamping down on this behaviour.
What might surprise people is that tighter regulation is exactly what some parts of the industry have also been loudly demanding. Not all companies in the sector are guilty of these practices. And nor is the rise in demand solely fuelled by the present hard times any more than consumers use Amazon simply because they can't afford to pay more for books.
When, for example, you can both apply and check credit-worthiness instantly on-line, there is no reason why banks still make their customers wait days for a small loan. Money should be paid into accounts when the customer needs it rather than when it suits the bank. It this convenience is why thousands more customers are turning to the sector every month.
But it is also a young industry. And as with any newcomer, it can be a little while before the right rules and protections are put in place and work well. The challenge, as always, is to provide these safeguards in a way that does not prevent consumers exercising their free choice to borrow how and when they see fit.
What might the framework look like to get this balance right? First, we have to prevent loans being given to those without regular incomes. Second, the amount that can be lent must take into account their ability to afford to pay back the loan on time to avoid extra costs. And thirdly, so-called rollovers where customers are allowed to take out new loans to pay off existing ones should be banned completely.
The best of the industry is already following these rules, and it is those companies which are responsible, transparent, straight-forward and accessible which will be the long-term future of the industry. But in the short-term, the industry should welcome action to protect the consumer by either driving the cowboys out of business or bringing them into line.
The short-term lending industry is not a flash in the pan that will disappear as soon as the economy and incomes start growing again. Whilst there is no room for bad practice, the sector can offer a valuable and valued choice to consumers and it is going to be a permanent and growing feature of the financial landscape.
