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Government U-turn on payday loans

14 December 2012

THE Government was heralded as having undergone a "Damascene conversion" after agreeing to cap payday loans in the House of Commons on Monday.

In a debate on amendments to the Financial Services Bill made in the House of Lords, the Financial Secretary to the Treasury, Greg Clark, announced that the Government agreed with all of them. He confirmed that the Financial Conduct Authority (FCA), the new regulator, "will have the power to impose restrictions on the cost and duration of a regulated credit agreement".

Stella Creasy, the Labour/Cooperative MP for Walthamstow, who began her campaign to cap payday loans in February, spoke of her gratitude to supporters, including the Bishop of Durham, the Rt Revd Justin Welby, who backed an amendment to give the FCA this power (News, 30 November), prompting the Government to make a U-turn.

"The Damascene conversion of the Government on the need to act on the cost of credit is very welcome," Ms Creasy said. She warned, however, that the FCA would not assume its powers until 2014, and that "there is still a window of opportunity . . . which might mean a bonzer Christmas for many of the legal loan sharks."

Mr Clark said that "some of us on the government benches have always regarded the powers that were going to be invested in the FCA as necessary," and that it was "necessary to have a degree of pace" in implementation. In the mean time, the Office of Fair Trading will have the power to suspend a credit licence.

The House also discussed an amendment to the Bill, supported by Bishop Welby, requiring the FCA to have regard to "the ease with which consumers . . . in areas affected by social or economic deprivation can access the services they wish to use" (News, 6 July).

Helen Goodman, the Labour MP for Bishop Auckland, expressed gratitude for the "divine intervention" of Bishop Welby, "who seems to have succeeded in reaching parts of the Government that we were unable to reach."

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