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.