People will find it hard to understand why the payday loan company Wonga is still in possession of a consumer credit licence.
So says Glasgow City Council treasurer Paul Rooney, and he is right. This is the firm that was recently exposed for having sent letters from fictitious law firms to customers who had fallen behind with payments. In some cases, Wonga added charges to customers' accounts to cover administration fees for sending the letters between late 2008 and 2010.
Unethical? Woefully so. Criminally fraudulent? Staff from the new regulator the Financial Conduct Authority (FCA) have met with officers from the City of London Police and the force is now going to consider whether there is enough evidence to start a criminal investigation.
The company was ordered by the FCA to pay more than £2.6 million in compensation, but many will feel a financial penalty is not enough. The episode will only increase public doubts over whether the Government is doing enough to stamp out unacceptable behaviour.
It will also confirm consumers in their low opinion of payday lenders generally. While short-term loans can perform a useful function, controversy swirls around them. In April, The Herald revealed that Scotland's senior detectives believe some such lenders are being infiltrated by hardcore criminals. The sector has an unedifying reputation for its impact on the poor: firms have found rich pickings among those on low incomes who struggle to make ends meet from one month to the next. Their eye-watering interest rates have come in for much justified criticism. There has been widespread disquiet about the advertising of loans to children. No wonder they are cited by debt campaigners as a frequent contributory factor in cases of debt crisis; no wonder campaigners worry that regulators are not doing enough.
That is not to say that measures are not being taken to make the industry operate more in the interests of customers. The overall costs of payday loans will be capped by January 2015, with the level to be set by the FCA. The regulator unveiled a further clampdown in March, including that payday lenders will be banned from rolling over loans more than twice (to prevent debts spiralling), that they will only be able to make two attempts when taking money from people's bank accounts and that lenders will have to tell customers how they can get free debt advice.
That is good, but is it enough? The FCA's recent clampdown needs time to bear fruit, but the specific case of Wonga's deplorable behaviour, as recently revealed, begs a robust response. Councillor Rooney believes the fledgling regulator's credibility is on the line and that it must act decisively against Wonga, and be seen to do so, in order to reassure a sceptical public that it is up to the job of stamping out bad behaviour in the sector. Wonga issued the fake lawyers' letters a few years ago, but that makes it no less shocking. Just how underhand must a firm's conduct have been before its licence comes under threat?