Exploitatively high-cost lending has to stop

by Sally Bercow

If you’re lucky enough to live in a Royal Palace, you’re not surrounded by “gold for cash” pawnbrokers. Neither do the door-to-door moneylenders that plagued my street in Tower Hamlets come to call. So I’m not going to go all faux woman of the people and pretend I rely on high cost credit. I don’t, haven’t (leaving aside the odd store card) and hopefully never will. But too many people in Britain do; millions of low income households depend on loan advances from pawnbrokers, payday lenders and doorstep lenders just to make ends meet.

These loans with sky-high interest rates come with devastating consequences, as borrowers are forced to cut back their spending on food, rent, utilities, fuel and other essentials in order to meet their loan repayments. The debt trap is blighting the lives of too many people, causing physical and mental health problems, damaging local communities and increasing the pressure on the public purse. In other words, high-cost credit affects everyone, whether you use it or not.

The UK now has one of the highest levels of personal debt in the world (hands up who doesn’t have a credit card, loan, overdraft, mortgage). The trouble comes when people opt for the wrong kind of credit and/or struggle with more debt than they can manage. And the harsh reality is that the government’s spending cuts mean that the light at the end of the tunnel is switched off until further notice: the job losses, public sector pay freezes, welfare cuts and reduced public services will only make things worse, hitting hardest those families for whom debt is already a daily misery.

It is high time we cracked down on the high-interest credit industry; those pay-day lenders who cynically exploit the low-income households that the banks and building societies won’t touch. These are the vulnerable who can least afford to borrow at extortionate interest rates; who are all too often trapped in a cycle of debt; who stretch to shelling out £82 in interest and collection charges for the pleasure of borrowing £100 because they feel they have no other choice.

Hand in hand with regulation to tackle legal loan sharking and cap the cost of credit, it is vital to increase access to affordable credit. As the proliferation of high cost lenders illustrates, people would rather get some credit – even at astronomical rates (there are short-term loans with annual interest rates equivalent to 2,700%) – than none at all. That is why the government should do more to promote and support credit unions: by allowing them to set up shop within post offices, benefit offices and local libraries, and thereby give them high street access and mainstream appeal. (Only around 2% of people in the UK are members of a credit union, compared to about 50% in Ireland, 40% in America and Canada and 25% in Australia and New Zealand).

Today proposals are being put to the House of Commons by Stella Creasy and Justin Tomlinson to give regulators the power to put caps on the total cost of consumer credit. The second reading of Stella Creasy’s consumer credit (regulation and advice) bill also takes place tomorrow. Both are sure to receive support from across the House as politicians of all hues acknowledge that action is urgently required make the lives of those living in low income households easier. Unscrupulous lenders should no longer be able to prey on the poorest people in our communities who can least afford their extortionate charges.

Sally Bercow is a Labour activist and freelance writer and broadcaster.

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5 Responses to “Exploitatively high-cost lending has to stop”

  1. Arguably, 2700% is only the “respectable” face of it. Here’s my article about one particular, quite well-known, lender in this field:


  2. The credit unions in Northern Ireland are extensive, highly popular and really make a difference to a lot of peoples lives. They work and I’m surprised England hasn’t embraced them in quite the same way.

  3. bb4 says:

    “millions of low income households depend on loan advances from pawnbrokers, payday lenders and doorstep lenders just to make ends meet.”
    Where’s the evidence for this claim?

    And why is high-cost lending exploitative? people have to sign up for them and CHOOSE to borrow the money in this ludicrously expensive manner. People should be responsible for their own actions.

    there is a danger that by criminalising it, the money lending will go even further underground and then it starts to get dangerous when legal mechanisms can no longer be used to reclaim the cash.

  4. Chris says:


    Absolutely agree but what about the really important issue – have you got any more pictures of you in that bed sheet?

  5. Well, I am sure that everything has a right to exist. On one hand pawnshop and payday lending are convenient, sometimes we really need to borrow money quickly, but friends and relatives can not help us with that. But on other hand, it’s not worth to use these high interest loans to cover casual expenses or just because it would be not bad to get some more cash. It’s not worth to forget that applying for a loan is a very serious decision and learn all the necessary information before choosing a loan. Furthermore, there are loans with much less interest rates available, and payday loan is not the only way to borrow cash. It’s not worth to get a high interest rate loan just because it’s easy to get approved for.

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