by Stella Creasy
Legal loan sharks are the Japanese knotweed in Britain’s consumer credit market. These invasive companies flourish by exploiting the demand for credit from families who find their incomes squeezed by the rising cost of living, wage freezes and unemployment and so are forced to borrow to make ends meet.
The government’s refusal to act against this industry means Britain is fertile ground for their loans at interest rates which can run to 16,000%. Yes you read that decimal point correctly.
In the payday loan world, offering money without credit checks, without advertising the costs and without any responsibility for the consequences is common place. When it comes to these companies, the impact of the extortionate rates they charge on the people they lend to comes second place to the profits they can make.
The chief executive of Wonga paid himself £1.6m last year, whilst Provident Financial posted a pre-tax profit of £162m in the year Britain went back into recession. As quickly as regulators try to address poor practices, another firm springs up ready to benefit from Britain’s dubious honour of being one of the few countries in the world where there is no limit on what you can charge for credit.
For nearly two years I’ve been calling for Britain to introduce total cost caps on the charges these firms can levy, putting a ceiling on the amount any loan could mount up to and giving consumers respite from the spiral of debt these firms can create. Twice now the government has voted against such measures, but as the evidence grows of the damage this is causing to millions of Britons they need us to not flinch from seeking every chance we can to make progress in championing the case for better regulation of these companies.
Such a moment of opportunity is upon us again.
