Mal Fletcher comments on the development of social responsibility in business

Mal Fletcher

Last week's decision by the Wonga payday loan company to write off debts of more than 300,000 customers points not so much to the power of the Financial Conduct Authority as to the community's demand for a new ethic in business.

In its deal with Wonga, the FCA, which took over regulation of the payday loans sector in April, agreed that a further 45,000 borrowers will not need to pay interest on their loans.

It is, of course, Wonga's exorbitant annual interest rates - up to 5800 percent - that have led to charges of loan-shark style behaviour.

The company offers people unsecured personal loans online, via its website and mobile apps accessed through PCs, tablets and smartphones.

Its practices demonstrate the danger of using instant gratification technologies to suggest, even remotely, that present choices carry few future consequences.

Whilst there is clearly a moral responsibility on the part of the lender to look carefully before leaping into a loan, there is arguably as great a responsibility on the part of the lender to make clear what will happen in the event of a default.

Putting interest rates in small figures on the bottom of a TV commercial is not enough - indeed, it is almost useless when the commercial itself is offering a utopian fix-it-now answer to debt.

The lender should set its sights on promoting healthy fiscal responsibility as opposed to taking advantage of either ignorance or desperation.

The FCA clearly agrees with this line of thinking. However, the real pressure on Wonga has not come simply from the FCA - though it probably wouldn't have acted at all without the legal incentive.

Wonga knows that it has been acting in a way that is counter to the run of public thought. It has sought to ignore ethics at a time when values are coming to the fore in debates about business practices and goals.

Ethics, as the branch of philosophy, broadly asks two questions. The first is: What's the right thing to do? The second: How might I apply moral principles in a given, perhaps complex, situation or to a particular pragmatic problem?

In the wider society's attitude to business - indeed within sections of the business community itself - the search for a new ethic has been going on for some time. Arguably, the same can be said for all of the most influential sectors of British society.

During the Great House Clean of 2010-2011, the ethics of almost every foundational institution were called into question.

What started with a loud and passionate debate about the trustworthiness of the banks, as the recession began to bite, quickly spread to questions about the behaviour of MPs amidst the furore over their expenses.