Why Are Payday Loan Companies Free to Shaft the Poor?

By Heydon Prowse, Guardian UK

10 September 12

Charging extortionate rates of interest, these companies are robbing the poor. I know, because I worked undercover for one.

f you asked to borrow my car for the day and I said sure, but then moved into your house, helped myself to the food in your fridge and pleasured your wife, you'd probably think I was a bit of a douche. But, with annual repayment rates of 4,214%, payday loan companies are about as pleasant.

In a sketch in the next episode of our BBC3 comedy series The Revolution Will be Televised (10pm, Wednesdays), my comedy partner Jolyon Rubinstein poses as a simpleton and visits a bunch of payday loan companies asking them for money, saying he needs it to pay back drug and gambling debts and does it matter that he's just been released from a mental asylum? Without exception, he was offered the option to apply for loans - one of £5,000 on the condition he pay back £11,398. Can't say fairer than that.

We decided to do the sketch as last year I had worked undercover in one of these companies for my producer friend Rob Moore, who had been investigating them for a TV documentary. My job involved going door to door around council estates in London to collect money from some of the poorest people in the country. As you'd imagine, it was an incredibly uplifting and life-affirming experience that I would wholeheartedly recommend to any gap year students unable to travel abroad.

The company Rob and I infiltrated is called Provident Financial Group. They are a personal-finance company that lends to people who otherwise couldn't get credit - the long-term unemployed, people on benefits etc - at extortionate repayment rates. This kind of reverse Robin Hood business model earns them more than £160m a year and profits have risen with the recession as the rising numbers of unemployed search for quick cash fixes.

The people who make these staggering profits possible are among the most vulnerable in society. My Provident colleague and I collected money from the unemployed, benefit dependents, alcoholics, single mothers, teenagers and people in fragile mental states who just didn't understand how badly they were getting shafted.

And the customers were so nice about it. A large part of the training for the job at Prov revolved around what agents should do if customers got tired of being robbed and decided to beat you up. Depressingly, though, I didn't get beaten up once - mostly the people I was robbing just made me tea. In one instance we loaned an old lady, who was on incapacity benefit and received child benefit for her three grandchildren, £1,000 (for which she would have to repay £1,950). The Provident agent then gave her a "LoveToShop" Provident Gold credit card with an APR of 254.5% (though, strangely, he didn't mention that bit). She begged us not to give her the card, because she didn't trust herself with it. The Provident agent just said: "Put it in your wallet or cut it up if you want to. The power is in your hands." And then all the irony in his body instantly evaporated and he collapsed in a heap on the floor ... metaphorically speaking.

But blaming the Provident workers is a little like shouting at a McDonald's cashier for giving you diabetes. Provident treats its staff almost as badly as its customers. The pay is awful and agents even have their wages docked if their customers don't meet the minimums on payments, which only encourages agents to adopt more aggressive collection tactics.

No, the people responsible for this ethical omnishambles are the top brass. The finance director, Andrew Fisher, was a partner at PricewaterhouseCoopers. The non-executive chairman, John de Blocq van Kuffeler, was a guest at William and Catherine's wedding, and the company's CEO is the aptly named Peter Crook.

Crook used to work for high-street banks such as Halifax and Barclays and pays himself close to a million a year. He is a living, wheezing example of everything that is wrong with the financial industries. This man doesn't design airplanes, build computer chips or hunt bosons. He's just a rich dude who has found a way of funnelling large quantities of our taxes directly from the benefit system into his own bulging pockets.

In many countries, charging interest rates as high as companies such as Wonga and Provident do would be illegal, but the paradoxically named Office of Fair Trading has concluded that there is no need for such drastic measures here. And do not underestimate the scale of this problem - Provident has almost £1bn in subprime loans out on the streets of the UK. Perhaps George Osborne should be clamping down on Crook and his cronies rather than kicking people off incapacity benefit.

And Crook typifies everything that is wrong with finance - the UK's flagship (and only remaining) industry, which the British government defends with the same depressing resignation as an abused wife: "He's not perfect, but he's all I've got." He's like a poster boy for David Cameron's Britain. He should have an official role in government. One position Cameron forgot to appoint in his reshuffle is a minister for shafting the poor. To be fair, he's already got it pretty well nailed with his current cabinet, but just to be sure, you know?