Time to crack down on the payday lenders exploiting students

In my role as Vice President Welfare at the National Union of Students, it’s not surprising I have lots to say on student finance, housing and health. So I was disappointed to have to drop out of today’s Westminster Higher Education Forum event on those topics because of the inclusion on another panel of the Chief Executive of Smart Pig, a payday lender that targets students.

NUS is not alone in being concerned about payday lenders on campus and Smart Pig in particular. Les Ebdon, the Director of the Office for Fair Access, also withdrew from the conference, believing that it would not be appropriate for him to speak at a conference alongside an organisation which offers high cost loans to students.

Last autumn, Money Saving Expert, (and former head of the Independent Taskforce on Student Finance), Martin Lewis, spotted that Smart Pig were being curiously shy about mentioning their 1,089% APR on their posters. He duly referred them to the Advertising Standards Authority (ASA) and the financial regulator, the Financial Conduct Authority (FCA) so they could investigate these breaches.

In January, Stella Creasy MP, a campaigner against payday loan lenders, also made the point that calling Smart Pig a payday loan lender was something of a misnomer. They are in fact ‘loanday loan lenders’ – the student borrows ahead of their next student loan payment (which itself attracts a real interest rate in England and Wales), rather than a weekly or monthly wage. This is despite FCA guidance which states that loans should only be made if the individual does not have to borrow to make repayments.

Of course, this isn’t an issue with just one company, however problematic. When NUS published Pound in Your Pocket, our research into student maintenance in 2012, one of the most worrying findings was how commonly students used high risk debt: 6 per cent of college and university students over 21 have had to turn to lenders like these. Worse still, since we published that report, grants and loans have failed to keep pace with inflation, and BIS have scrapped the ring-fenced Access to Learning Fund which aimed to support students in hardship.

So we believe improving maintenance support is a critical priority for the next government, whoever they may be, and have been saying that as loudly as we can. And what is really pleasing is that politicians are listening. Labour have already announced they want to increase the grant, precisely because of the impact of payday loans. As Liam Byrne wrote last week:

“We’ve heard loud and clear the message of the National Union of Students and others who have told us that the cost of living confronting students from low-income families is creating a world in which campuses are becoming homes to pay-day lenders. We can’t have that.”

Greg Clark and Julian Huppert made supportive noises at the HE Hustings earlier this week, and even vice chancellors now support our position, stating in their controversial letter to The Times on Labour’s fee policy, that action on pay-day lenders ought to be a priority.

It’s still deeply disappointing that the Westminster Higher Education Forum think Smart Pig are a fit and proper speaker for a panel on student wellbeing. But we need to create a fit and proper student support system that ensures no student ever needs to use them in future. Amongst other things, we need to restore ring-fenced hardship funds, boost support beyond the level of the grant – especially for NHS-funded healthcare students – and make sure support is paid monthly to help with budgeting.

NUS will be holding a day of action on 12 March on the cost of living. I hope that the HE sector and politicians respond.

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