The
government has announced that it intends to legislate to cap the cost of
credit.
This
is a massive u-turn by George Osborne who has persistently refused to act as
pay-day loan companies have charged interest rates of 4000% and more to the
most desperate lenders.
Credit
for this change is substantially due to MPs of all parties who have been
campaigning to stop the obscene charges and interest rates being charged on
these loans. In particular, I want to credit my Sheffield Central colleague,
Paul Blomfield MP, who gathered large parliamentary support for his High
Cost Credit Bill only to see it blocked by David Cameron and Nick Clegg in
July.
That
Bill also gathered big support from outside Parliament, from organisations like
Citizens Advice Bureaux, Which and the Women’s Institute.
But, instead of being downhearted when the Bill was blocked, the campaign
continued with A Charter to Stop the Payday Loan Rip-off, which got even
bigger support. Perhaps it was the scale of that lobby which eventually forced
change, against George Osborne’s ideological belief that ‘the market should
decide’.
Obviously,
we will now have to wait to see the detail of what the government is actually
proposing. We should expect that the proposals will address all the issues set
out in the Charter. We need regulation, and then enforcement, of payday lenders
to:
- stop them giving loans to people who can’t
realistically afford to pay them back
- stop them repeatedly rolling over loans and creating
spiralling debt
- stop hidden or excessive charges
- stop them raiding borrowers’ bank accounts without
their knowledge and leaving them in hardship
- stop irresponsible advertising and instead provide
clear and transparent information
- require lenders to promote free and independent debt
advice, and ensure they co-operate with other services to help people get
out of debt.
