Britain: The scourge of payday lenders - one million rely on loans this Christmas

Christmas and New Year is traditionally a time for celebration and the strengthening of relationships with friends and family. That such warmth between people is rare enough to be termed the “magic” of Christmas says a lot about the alienation of people from their own communities in their day-to-day existence under capitalism.

The bosses, unsatisfied with the year’s work so far - which has seen hikes in energy prices, food banks opening at a rate of three per week, attacks on unions and students, and the demonisation and barbaric attacks on benefit claimants - see the Christmas celebrations as a chance to tighten the screws even further on the working class.

Under capitalism, spreading the “Christmas spirit” doesn’t come cheap. When wages are stagnating at an average of 8% lower than what they were in 2008, while the cost of food, heating, transport and other basic necessities is rising, many families’ mince pies will be leaving an unpleasant aftertaste of financial worries.

According to the Money Advice Service around one million Britons will be using payday loans to cover the cost of Christmas. 18 million people are worried about how to afford the cost of Christmas, while 17 million expect to begin the new year in debt.

Companies such as Wonga are rubbing their hands with glee at these figures. A typical payday loan carries interest of around 2,300% per year, meaning that the £487 that each individual is predicted to fork out over Christmas this year, if covered by a payday loan that is paid off at the end of January, will bring total repayments of almost £1,000. It’s no wonder that a whole cluster of specialised “Christmas payday loan” companies have appeared towards the end of the year, while banks such as Barclays are specifically researching the best ways to break into the short-term high-interest loan market as quickly as possible.

Citizens Advice and MoneySavingExpert have both recently pointed to the epidemic of irresponsible advertising by payday lenders. According to Ofcom, in the last four years the number of children who have seen adverts for payday loans has increased by 20,000%. Companies like Wonga and Cash Lady deliberately target children with adverts that include catchy jingles, cartoon characters and celebrities. Research by MoneySavingExpert suggests that one in seven parents have been nagged by their under-10s to take out a payday loan after having refused to buy the kids something. A number of payday lenders have recently had adverts banned by the Advertising Standards Agency for being misleading over the repercussions for failure to pay the money back.

The CEO of Citizens Advice said “Payday lenders are unashamedly and irresponsibly using adverts to prey on poorer households in a bid to capitalise on the cost of living crisis. Payday lenders should not be targeting children and teenagers with adverts...The ads draw a veil over the hardships caused by payday loans”.

Those hardships can be crippling, with some of these loans carrying interest rates of up to 5000% per year. Including mortgage repayments, the average amount of money owed to banks, payday lenders and other parasites by British adults is £28,630 per person, which is 116% of average earnings. The insecurity and stress of debt is stomach-churning, and yet this is what capitalism inflicts upon a growing number of people with increasing intensity every day.

Far from being killed off by the cold weather, Christmas is a time when the most unscrupulous parasites that capitalism produces do their best to leach off society. Advertising companies rake in millions of pounds for producing syrupy campaigns whose not-so-subtle message is that Christmas is all about spending money. Payday lenders follow this up with offers of quick and easy money whose rate of interest is buried in the small print. The government meanwhile claims the credit for recovery in the retail sector, whilst patronisingly lecturing workers on the foolishness of getting into debt. These people make money out of money and contribute nothing to the development of the forces of economic production.

What this circus of Christmas capitalism makes clear is that the wintery fog of profit-driven competition leaves the bosses unable to see further than the end of their own noses. Simply lending money to workers at extortionate interest rates to cover the cost of Christmas does not overcome the contradiction that workers are not paid enough to buy the goods that capitalism creates. In fact no measure taken under capitalism can overcome this contradiction - it is inherent to the system.

This is why debt was built up to such incredible levels before the crash of 2008. The crash happened because, when the only way to keep the capitalist economy going is by getting people and governments into deeper and deeper debt, there inevitably comes a point when everyone realises that no one is ever going to be able to pay this money back. The Emperor is revealed to have no clothes and everything comes crashing down.

Politicians and bankers like to talk about how they’ve learned the lessons from the crash, but this is nonsense. The only lesson to be learnt is that the accumulation of unrepayable debts is inevitable under capitalism. To avoid crisis we must overthrow capitalism. This is not a lesson the politicians and bankers are willing to learn. In fact, they are merrily doing their best to re-establish the credit bubbles and dodgy debts that got us into this mess in the first place. The government is lending students the money for tuition fees, most of which will never be paid back. The government is underwriting mortgages so that the banks can lend more money to people less likely to be able to pay it back. And it’s no surprise to find that 62% of payday loans are granted without first checking whether the borrower is able to repay it.

As payday lenders seem to be targeting children to groom a new generation of debtors, the future for the youth under capitalism seems as bleak as the winter weather. But as Marxists we can start the new year with optimism. The ideas of Marxism are spreading, and every day more people look to socialist solutions for their problems. Taking the banks into public ownership under democratic workers control would give us the power to provide people with cheap credit. Doing the same with the energy companies and big business would bring down the cost of necessities thus melting away the need for debt. We could plan the economy on a rational basis, for need and not for profit. It is this red flame of Marxist ideas which will thaw the biting frost of capitalism and clear the way for the flowering of a socialist spring.