by Stella Creasy
LAST WEEK I wrote that loan sharks are circling Britain’s poorest families, excited by the likely effects of the Government’s spending review and lying in wait to prey on people’s increased financial vulnerability. This week, thanks to the hard work of campaigners and opposition MPs, the sharks are now starting to come under threat themselves.
My consumer credit (regulation and advice) bill, which seeks to combat exploitation in the payday and doorstep credit market, passed through its first reading this week. The bill pushes for a range of measures including a cap on the total cost of borrowing money, an expansion of credit union access points through the postal network and a levy to provide funding for debt counselling services to help those in financial difficulty.
It was supported through its first reading by a large number of Labour MPs who believe if the government is intent on pushing their budget on Britain, it will raise the number of families living with the daily misery of debt. We want them to take responsibility for the consequences of their policies– and judging by the growing public concern we are not the only ones.
According to the association of business recovery professionals, four in ten people are worried about their current level of debt, with three million fearing redundancy and two million having taken on more debt in recent months.
One in ten people frequently struggle to make it to payday, with money tending to run out on the 20th day of the month. These are the people who will bear the brunt of the comprehensive spending review. Yet these are the people who can least afford to. Family action have identified how a total of twenty one different cuts will hit low-income families hardest, from changes to working tax credit to the rise in VAT. So too, a TUC/Fabian society report shows that the country’s poorest tenth of households will be hit thirteen times harder by these spending cuts than the richest tenth.
Recent research from the University of Cambridge highlights how these kinds of personal debts are related to economic growth. As our economy stumbles under the weight of cuts, more and more people on low incomes will be forced to borrow to keep their families financially afloat. In supporting this bill and holding the government to account for their plans we are speaking up for the poorest consumers in Britain.
The second reading will be in February 2011– but we don’t have to wait until then to continue to make the case for action. The government has also recently announced a review of the provision of consumer credit. But so far they have only committed to action on store cards and credit cards, thus ignoring the millions of people in our country for whom access to those sources of credit is not available and for whom these companies are their only option. In the coming weeks we are determined to get them to rethink this decision. We’re calling for the review to be expanded to include all forms of borrowing and so open the door for action to tackle legal loan sharking. We want them to give the same consideration to the needs of those for whom the never-never is a fact of life as they do for those with an Amex card or a trust fund.
Despite the pressure applied by the end legal loan sharking campaign, better banking, myself and others, ministers have yet to speak up on this issue. This is all the more frustrating when you consider it is official Scottish Liberal Democrat policy to introduce “anti-usury” laws and crack down on high-interest moneylenders who exploit the vulnerable. So too in 2005 many members of the government expressed support for a ceiling on interest rates. Luckily the mechanisms of parliament can help us cut through their reticence now they’re in power in Westminster. That’s why next Tuesday I have secured an adjournment debate, at which government ministers will be forced to respond on the record. At last we will know where this government stands and whether they are prepared to let loan sharks continue to target Britain’s families unopposed- or if they will listen to our concerns.
As Labour MPs we’re working together to speak up for the needs of those who are being hit hardest by the cuts– the very same people who are most threatened by exploitative moneylenders. Getting the credit review to include the antics of loan sharks is just the first step on the road towards a fairer credit market for every consumer.
But we can only achieve these goals if we keep up the pressure. And that’s where readers of Labour Uncut can help. Please encourage your MP to attend the adjournment debate, which will take place in Westminster hall at 11am on Tuesday 9th November. Members of the public can also attend, so we can demonstrate widespread indignation at the sickening practices of legal loan sharking, and help end them once and for all.
Stella Creasy is Labour and Co-Operative MP for Walthamstow.
You can find more information on the measures proposed in the bill, and this campaign here.
Tags: consumer credit (regulation and advice) bill, families, finance, Labour, legal loan sharks, Stella Creasy, Westminster Hall
I wrote to my Labour MP, about some companies charging 3600% for pay day loans, yes 3600% and advertising it on the internet. One is called WONGA.COM. As yet, I have not received a reply. It’s funny how keen he was to reply prior to the election. He must be too busy, looking for other jobs to supplement his income.