Posts Tagged ‘loan sharks’

Labour’s “Wonga levy” is a good start, but more is needed

17/10/2013, 05:36:25 PM

by Matthew Lawrence

Labour must be bigger and bolder if they are to tame the payday lending industry and make affordable credit a reality for all.  Today’s announcement that it will impose a “Wonga levy” to fund the expansion of credit unions is a good step forward, particularly when combined with its commitment to cap the total cost of credit.  However, as with other consumer markets that are currently failing, much more must be done to build a financial system that is more locally rooted, democratic and focused on value creation, not rent extraction.

Size matters.  Miliband’s proposal to introduce a levy on the profits of payday lenders – which would double public funding to £26m for credit unions and other alternative low-cost providers – simply isn’t enough. Whilst the levy itself is a useful mechanism (and one that IPPR in its on-going research into the sector would recommend)  in a market that is now worth over £2bn it risks being a drop in a ‘legal loan shark’ infested ocean.

This is particularly the case given that, as the ONS announced yesterday, the UK’s long wage squeeze is set to continue, the industry and its predatory practices are only set to grow.  To be worthwhile, the levy must be set at a level to make a real difference within the market.  But Miliband’s argument is sound: payday lenders should accept their responsibility for ensuring ‘affordable credit is available’.  But Labour can go bigger and properly capitalise on alternative lenders through a windfall levy on the industry that has made hay whilst the sun has failed to shine on the average British household.  After all, a “windfall levy” didn’t work too badly in 1997.


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Loan sharks: the government’s gonna need a bigger boat

21/11/2011, 01:43:31 PM

by Stella Creasy

For 18 months now, many of us have been trying to sound the alarm about the legal loan sharks who infest Britain’s consumer credit market. These companies now lurk in every high street and across every web banner. Their increasing presence indicates not only the desperation of families who find too much month at the end of their money, but a systemic failure to tackle our financial culture. Britain has always had a credit habit much bigger than our European neighbours. But those who blame our current consumer credit crisis on a public living beyond its means fail to understand the pressures now driving millions into debt – or the importance to our economy of doing something about it.

For more and more Britons, debt is a fact of life, as food, energy and transport costs soar. Aviva has revealed 52% of UK families owe £10,500 on average, on loans, credit cards, overdrafts and other unsecured debts, a figure equal to half the average annual UK household income. The consumer credit counselling service identify 6.2 million households as financially vulnerable. Half of these are already either three months behind with a debt repayment or subject to some form of debt action such as insolvency.

For many, it is that very willingness to borrow for the future that has made them so vulnerable. New analysis of financial services authority figures estimate that the total number of mortgages in arrears, in possession or subject to forbearance is 1.2 million. This equates to nearly 11% of total outstanding loans in some form of financial distress. (more…)

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

30/10/2010, 10:30:25 AM

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. (more…)

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