The loan sharks are circling, and the government doesn’t care

by Stella Creasy MP

Some facts are already depressingly familiar: the spending review will put half a million public sector workers out of a job; another half a million people in the private sector are expected to be fired as the economy slows.  Measures which support family incomes – whether tax credits, child benefit or the child trust fund and the savings gateway – are being stripped away. It is the perfect storm that occurs when liberal and conservative dogma are combined: a government imposing draconian cuts with one hand and taking away mechanisms to help people stay afloat with the other.

Here’s a consequence of the budget less widely publicised: the (loan) sharks are now circling Britain’s poorest families, watching them struggle financially and sensing a business opportunity. Indeed, the dishonestly named Peter Crook, chief executive of Provident, is delighted with the turn in events. It is no coincidence that following the comprehensive spending review his company’s share price rocketed by 5%. Provident offers short-term credit with a typical APR of 272% to those for whom banks and credit cards are out of reach – mainly women, the low paid and those with poor credit histories. It is a company that makes money by locking people into cycles of debt, interest on debt, late payment charges and interest on late payment charges.

And Peter Crook isn’t the only one. Here in my constituency of Walthamstow, shops offering payday loans and hire purchase agreements at rates averaging 444% pockmark our high street. I get people in my advice surgeries whose lives have been made a misery by these companies, as their families live under the constant threat of repossession or bankruptcy. Meanwhile, our fantastic local credit union is growing quickly as it seeks to serve a community facing severe financial hardship.

In 2005 senior members of this government including Nick Clegg, Vince Cable, Danny Alexander and Ed Vaizey all signed an EDM calling for action on the interest rates these legal loan sharks charge. In 2010, despite repeated requests, I cannot get them even to acknowledge the need to protect the poorest in our society from credit exploitation. It’s not just me. They seem intent on ignoring the excellent work done by the End Legal Loan Sharking Campaign and the Better Banking Campaign on this subject too. The coalition agreement promises action on excessive interest rates for store and credit cards, but that will do nothing for those for whom this avenue of credit is closed. The government talks of fairness, but how can it be fair to ignore that the people paying the highest rates on loans are those who can least afford it?

Next Wednesday I am introducing legislation in parliament – the consumer credit (regulation and advice) bill – to shame them into action. It seeks to confront legal loan sharking by introducing a cap on the total lending rate that can be charged for providing credit, including any late payment and default charges. This serves to prevent extortion by limiting the total amount that lenders can charge, without setting an arbitrary interest rate cap that could end payday loans altogether and so unwittingly increase the market for illegal loan sharking. It also seeks to impose a levy on consumer credit agencies to pay for debt counselling and advice services. Just as the drinks industry came together to recognise their responsibilities through instigating Drink Aware, so it is right that the banks do the same for those who get into financial difficulties.

The bill also aims to improve access to the valuable service that credit unions provide by integrating them with the post office network, and to give greater powers for local authorities to veto licences for high-street credit agencies. Taken together, this package of measures makes a concerted and focused effort to tackle problems associated with increasing amounts of personal debt – problems which are only set to get worse after the government’s spending review has left people facing reduced public services, tax credit and benefit cuts, pay freezes and unemployment.

I’m asking other MPs to join me in Parliament that day and show the strength of support for action on these matters. The department for business, innovation and skills is holding a review of consumer credit and personal insolvency. We must challenge this government to ensure that this review takes into account the threat that legal loan sharking poses to the most vulnerable people in our society. We must also challenge our consumer credit industry to do more to help those people whose financial desperation form its profit margins.

Please ask your MP to join me on 3 November or sign early day motion 872 on the subject. Don’t let Vince Cable think he can forget the poorest consumers in our society – the people who rely on progressive politics need and deserve nothing less.

Stella Creasy is Labour and Co-Operative MP for Walthamstow.

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6 Responses to “The loan sharks are circling, and the government doesn’t care”

  1. Jane says:

    I hope your legislation to control these disgraceful sharks is successful. They exist throughout the country and of course target the disadvantaged. However, they have been in existence for many years and are not a result of the planned changes to welfare benefits outlined by the coalition government. If you are saying that planned changes may – just may increase their business then this would be acceptable.

    Another point. You seem to be placing together the deficit and the national debt. Our current deficit needs to be reduced as for many years our national spending exceeded our revenues. In 2002 debt fell to 29% of GDP and rose to 37% – an increase in spending on health, education and unemployment benefit increases. Clearly the right decision at the time but a political one not influenced by any bank.
    Since 2008 it has increased sharply – lower tax revenues, benefits and the bank bailout. The IFS says it will take until 2032 before we return the proportion of debt to GDP as 40% and will rise to 100% in the next few years.

    Also, it was Price Waterhouse who produced the report (excellent analysis) of the number of jobs that COULD be lost in the private sector with the reduction of public service finances. They also state that the private sector will make up for many of these losses. The Office of Public Statistics also state that whilst 6 million people work in the public sector (an increase of 850,000 since 1997)there is an 8% wastage each year as the turnover in some parts of the country is high. Further there is a higher proportion of older workers employed by the State and many jobs will be lost through retirement. We know of this from the national press as many workers have been offered and accepted early retirement.

    Finally, it is all rather depressing when everything that I have read on the global crisis indicates that as well as blaming the financial sector blame also lies firmly with governments who failed to ensure appropriate regulatory regimes and were unable to keep up with new financial areas – hedge funds etc etc. I can recall the Bank of England warning many years ago about house prices being too high and the bubble breaking when prices would fall. Low interest rates encouraged borrowing with improper credit conditions etc etc. We also know that our trade deficit meant that national spending exceeded production and Mervyn King outlined this to the TUC Conference this year. Again this is political decision making and we must bear some responsibility.

    Blame the bankers but you must also blame the last government too. All the evidence suggests that public spending has been far too high and we are now paying the price. I just wish that MPs acknowledged some errors made in the past rather than try and blaim the coalition government who have to rectify the resulting problems. We all know that many areas of welfare spending were clearly out of control and making people very angry as they felt it was unfair. The last government was looking at similar cost cutting measures too. I sometimes feel despair when MPs blame the current government for everything. For myself, I love this coalition government and I say this having voted for labour for 40 years. I hate the nastiness too against the Lib Dems – so much so that I intend voting for them in the future.

  2. Think this is a good idea by Walthamstow’s MP. Does anyone know if this Bill gets passed will it take effect throughout UK, including devolved regions, or just England?

  3. Hal says:


    Your economic analysis is completely wrong: public spending was not too high. Government debt was until recently *very* low by historical standards, and is now still lower than its average over the last 100 years. Check it out with google.

    The current deficit is due to the reduction in tax revenues caused by the recession, and deficit spending is the almost universally acknowledged correct response to a recession. When the deficit needs to be reduced, it can easily be done by tax increases for the richer half and *modest* and gradual reductions in spending. This is what the LibDems advocated during the election campaign and many of their voters are horrified to see them doing the exact opposite in government.

  4. Paul says:

    I really think you are detached from reality – Banning people like Provident would mean either no credit for poor or bad credit people, or worse still illegal load sharks. – Provident do not offer incentives or any other imoral incentives, and it really bugs me that do gooders will take away the final chance of credit poor people / bad credit people have. Leave us alone and go bug someone else.

  5. Bryant says:

    We have legislation already. Provident I assume have a credit licence which from memory comes out of the consumer credit act which was brought in to end illegal loan sharks. People need these services. Get real Stella. Another middle class socialist I fear. We have real issues to deal with in this country!

  6. Alisa says:

    Not payday loans are the bad guys. They simply provide a certain service just like many companies do. It is not their fault that their customers have no clue how to manage the personal finance. I am ok with my money. I do not get paid much, but I know what savings and spending things are, so there is no need for me to go and borrow money from somebody else. Even if I do this, I am always ready to pay everything back plus the interest rate if required of course. So some people should really stop complaining and start making right finance related decisions so that they did not need to blame everybody but themselves for being irresponsible.

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