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.