Your chance to help stop legal loan sharking

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 checkswithout 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.

The Financial Services Bill currently going through parliament covers many issues including reforming the way banks are regulated and the creation of a new Financial Conduct Authority (FCA). Crucially the new FCA will also oversee consumer credit – and have the power to act to address “toxic” financial products which cause detriment to consumers.

Labour members of the committee debating this bill have tabled an amendment that would give the regulators the power to cap the charges any company can levy for credit – so offering for the first time in the UK the potential for capping the costs of credit and sending a strong message that excessive prices for credit will not be tolerated because of the problems they cause consumers. It is Amendment 87 and refers to Clause 22 of the bill.

It is possible that the committee could get to this amendment on Thursday 1 March so it is vital to contact your MP as quickly as possible to ensure they are aware of this chance to tackle legal loan sharking.

This link takes you a list of the 18 MPs on the committee who can vote for this amendment and along with a sample text to send your MP to ask them to lobby their colleagues on the committee to vote for this amendment.

It’s actually an offence in the UK to grow or cultivate Japanese knotweed- if you think it’s offensive that the government allows legal loan sharking to cultivate by refusing to regulate this industry, join me in calling for amendment 87 to become law and help eradicate this pest from the lives of British consumers.

Stella Creasy is Labour and Co-operative MP for Walthamstow

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6 Responses to “Your chance to help stop legal loan sharking”

  1. swatantra says:

    Full marks to Stella and all the Coop MPs for pushing this point home, about loansharks fleecing the most vulnerable. Unfortunately other MPs are not that proactive and if yours is a Tory MP like mine John Baron, not at all interested.
    There has to be better regulation of financial services and more opportunities and fairness for Credit Unions to work in a very competitive market. on a level playing field. That is the only way to combat the unscrupulous loansharks.

  2. Nick says:

    What’s wrong with debt? Labour advocates debt as the fix for the UK’s problems.

    True government debt is 225,000 pounds per household.

    More spending and borrowing as advocated by Ed Balls. 225,000 of debt has to be a good thing.

    You’re off message Stella. Should have check the Blackberry first.

  3. dallior says:

    What is that shill on the article about workfare talking about?, get rid of him, my grandparents would be totally ashamed of that type of rhetoric coming from a so called left organisation, makes one wonder wether people of his kind would like to just pen push in the background no matter who has power, enforced and underskilled labour is wrong and counterproductive, I will never vote labour again if the party continue to be all things to all men.

  4. Oliver says:

    Stella, this is great work and to be commended. It’s incredible how this has been allowed to come about in the first place.

    However, once this have stopped (fingers crossed), let’s make a start on preventing the circumstances in which people are having to turn to these loan sharks.

  5. Has anybody complained about these payday loan companies getting bailed out by the taxpayer then using the bailout to pay mega bonuses to the upper management? No, the government and banking industry want to make it harder for those who depend on the occasional payday loans to get through any rough patches that come along. This so-called watchdog agency created by Obama should concentrate on the big banks like BofA, JP Morgan-Chase, and Wells Fargo. these companies are trying to foreclose on loans that have been renegotiated through federal programs. Thousands of people are losing their homes because of these companies not keeping track of payments made to their subsidaries which more than a few have gone belly-up and misfiling of paperwork. These mistakes are costing the homeowner billions on top of their homes. Obama’s watchdog should be looking into these breaches of contracts instead of the payday loan industry.

  6. Martin says:

    I totally agree with this article. The poorest of the poor are least able to manage their budgets as everything is going up in price. This country needs to get back to producing things other that debt then payday loans won’t be necessary.

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