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Leeds MP calls for rate cap on doorstep lenders
A 30 per cent cap should be imposed on the interest rates charged by doorstep lenders who offer loans to the poorest families, a Leeds MP said today.
Leeds West Labour MP John Battle has warned that efforts to regulate the home credit market is failing and that thousands of low-income households will be plunged into crippling debt this Christmas.
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The booming industry of doorstep operators and payday lenders is making millions from society's most vulnerable families via high-cost, sub-prime credit.
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While the Bank of England's rate is at an all-time low, these companies can legally charge sky-high interest rates.
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Mr Battle, a long-time campaigner on the issue, has backed a parliamentary motion which claims that one lender, Provident Financial, is charging 82 for every 100 lent, which is 26 per cent higher than was reported three years ago.
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Mr Battle said: "There have been real efforts to get credit unions going but they are being undermined by the doorstep home credit lenders who are charging absolutely rip off rates of interest, which are driving people deeper and deeper into debt at the worst of all times.
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"For most people, Christmas is not the arrival of a Christmas hamper but another knock on the door for someone offering to buy out their debt, to push them further into the debt mire."
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In 2006 the Competition Commission said doorstep lending companies were overcharging customers up to 75m a year.
The Early Day Motion, which has been tabled by former trade minister Ian McCartney, calls on the Government to provide the Office of Fair Trading with the power to cap interest rates and Mr Battle believes this cap should be at 30 per cent.
Consumer Affairs minister Kevin Brennan told a Channel Four Dispatches documentary this week that the Government have so far failed to impose an interest rate cap on these legalised companies because consumer groups advised that it might force people into the arms of loan sharks.
But he added that the Office of Fair Trading is now looking into the rise of the payday lenders – where people are loaned a relatively small amount of money until their next wage packet.
Shoppers are expected to spend 31 billion on the High Street this Christmas and over 7 billion of that will be put on plastic.
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Friday 25 May 2012
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