But in recent years, the growth of payday lending has changed the face of this form of borrowing, quite literally from a very personal form to a more virtual one though payday loans are also available through high street stores. This fast-changing evolution in response to customer demand, investor appetite, technological change and new regulations further complicates the nature of the industry. Technological developments have clearly facilitated the financialisation of everyday life Davis, So, while payday lending itself is not new, the ability to access credit online within hours, if not minutes, would not be possible without modern credit scoring techniques and online platforms.
They found that 60 per cent of payday loan customers were male and also young compared with the population as a whole. However, 21 per cent of respondents said that they did not know what their household income was and so were not included in the median figure. And a further 23 per cent of customers stated that they had a variable income and so, again, were not included. This reflects, perhaps, the nature of the loan, which is intended for people in work but with low or irregular incomes. More than half 59 per cent of customers said that they could not have gone without the item they purchased from the loan but, in a later question, 24 per cent of this group subsequently said that had payday loans not been available they would have gone without.
Customers said that, when taking out the loan, they had been confident about their ability to repay it on time, but 17 per cent admitted that repaying the loan had been more difficult than they expected. In order to explore these issues in greater depth, we carried out AHRC-funded qualitative research in-depth interviews with 21 borrowers who had borrowed from payday lenders in the previous year.
We recruited interviewees using a specialist company who identified people in shopping centres and high streets using a screening questionnaire the authors had designed. We interviewed a broad mix of participants in terms of age, gender, employment, family type and so on. Where possible, the authors of the article conducted the interviews in pairs to ensure research quality and safety.
The research received full ethical approval by the University of Birmingham and we took ethical concerns seriously.
We gained informed consent by explaining, at the beginning of each interview, the nature of our research, how the data would be used and this was also explained in our research information sheet which we gave to each participant. This payment was initially queried by our university ethics reviewers and we appreciate the debate about paying respondents Thompson, but we wanted to recognise the time and help that interviewees gave us. We also provided them with an information sheet with details of organisations providing free, confidential and independent advice on money issues, should this be of use.
The interviews were carried out by the authors who are fully trained and experienced in carrying out interviews into potentially sensitive issues. We have used pseudonyms and other measures to ensure participant confidentiality.
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Each interview was digitally recorded and transcribed in full. We had identified key themes from the literature and had a broad theoretical framework but remained open to new themes emerging from the data. The next part of this paper illustrates these themes. Our analysis clearly shows the role of poverty and precarity in causing a need for payday lending. We also show that people's views of payday lending were complex, with many positive aspects highlighted alongside the more familiar concerns about the great expense of this form of credit.
Respondents mentioned a range of reasons for needing to borrow money including: variable wages; insecure work such as zero-hours contracts ; self-employment; loss of employment; low levels of benefit income; loss of benefit income due to cuts and sanctions; and benefit delays. The following case studies are chosen as typical examples to illustrate this. Amy was in her mids living with her partner, Howard, and was the mother of a young child.
Howard was paid on a weekly basis and their level of income would change from one month to another, depending on how much he earned from additional jobs and overtime.
Amy had taken out a wide variety of credit products. She needed the credit for a range of things, including baby items and a replacement tumble dryer. She also, at one time, needed a loan to pay her rent due to delays with housing benefit:. I was on housing benefits at the time and my landlady didn't want to wait for the claim to go in and we were getting harassed and I was pregnant.
I wasn't very well and basically, just to get peace and quiet, I went and got a [loan] out. Sarah was 26 and a single mum with two children who had recently started working in hospitality on a zero-hours contract. She was already using a wide range of credit products, including home-collected credit, pawnbroking, payday loans and credit unions. Within the last twelve months, Sarah had borrowed from one online payday lender and one high-street payday lender even though she was unemployed at that time.
Kate was a year-old student living with her partner, who was self-employed. Trixie was a year-old single mum with two children, one of whom had recently turned She lost her job in and turned to a small payday lender to help tide the family over until she was able to find new employment. Georgina was an unemployed year-old woman who lived with her mother who was also out of work. She had borrowed from a number of online and high-street payday lenders.
She commented that she originally needed the money:. And while the problematic aspects of payday lending certainly deserve attention see next section , the majority of payday loans are, indeed, repaid on time CMA, a.
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The borrowers in our sample generally appreciated the fact that the online application process for a payday loan was simple and quick. They liked the fact that they had access to credit the same day if not within an hour of their application being accepted.
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Some also liked the anonymity of the online process as they felt embarrassed or ashamed that they needed credit and did not want to feel judged. Shame-avoidance was not the only reason for preferring online methods. In a few instances where people had used a face-to-face retail payday lender they said they had been treated unfairly or had even been offered more credit than they wanted. Borrowers also generally saw borrowing as a means of managing their situation independently and responsibly.
However, in some cases, borrowers did eventually ask their family for help if they had suffered financial difficulties as a result of taking out the payday loan. And sometimes families intervened as soon as they became aware that a family member had used a payday loan. Less attention, however, is given to another feature that borrowers also generally valued — the fact that a payday loan could be repaid quickly. Many of the borrowers we interviewed were debt averse and liked the fact that the payday loan could be repaid quickly so that they would not have a debt hanging over them.
The nature of payday loans is therefore very different from ongoing credit card debt or longer-term personal loans. Olivia, for example, was 29, with a mortgage and a single parent to three young children.
She was not currently working. I could pay it back out of my tax credits, which wasn't a problem.
If I remember rightly, I applied for the loan in the morning, and within, I think it was about 40 minutes, the money was there in my bank, and then I went out and spent it, as you do [laughs]. Then when it was time to pay it back, I got an email the day before, just reminding me that it was due to be taken out of my bank the next day, and it went really well. I didn't even have to speak to anybody, which was great. I'd rather no one know, than go into a shop.
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I mean, you can walk into a shop and the person behind the counter, you might know them, and I'd rather, you know, just do it where no one knows; they don't know who you are. In terms of the cost of credit, Ian thought that, on balance, the cost of the loan was proportionate to the ease and speed of the transaction:.
I thought it seemed reasonable if I could get hold of it quickly, a hundred pounds isn't much to worry about. So with that in mind, I was like, that is reasonable. I know what I'm buying into. There wasn't anything hidden underneath any of that. Some people also felt that payday loans allowed them to maintain their financial independence and dignity, and people were prepared to pay quite dearly for this. For example, Wayne was 38, working full-time and a father of two who was separated from his partner.
Wayne had considered other options first:. I did think about asking friends, family, you know.
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