A CROSS-PARTY group of MPs, supported by charities and consumer
groups, this week launched a six-point "Charter to Stop the Payday
Loan Rip-Off" (News, 11
The document accuses payday lenders of "breaking promises they
made in their own charter", and says: "Self-regulation has failed."
It calls for "effective regulation of payday lenders and high cost
credit, which is properly enforced".
Those involved say that new regulations must stop lenders giving
loans to people "who can't realistically afford to pay them back",
and "stop hidden or excessive charges". The new charter endorses
the "growth of credit unions and other forms of more responsible
lending", and called for "banks to increase the availability of
credit to people on low and middle incomes". It also calls for
research to be undertaken on capping the total cost of credit.
"Payday lending based on charging extortionate interest rates
and extorting money from the poor through unfair and predatory
lending practices has no place in society," said Niall Cooper,
director of Church Action on Poverty, one of the groups behind the
charter. The Labour MP for Sheffield Central, Paul Blomfield, led
the cross-party group that developed the charter. "The FCA's
proposals for regulation are a step in the right direction," he
said, "but they don't go far enough."
During Questions in the House of Lords on Tuesday, the Labour
peer Lord Touhig pointed out that one man who defaulted on a payday
loan of £120 ended up owing £1800 after the lender made 330 failed
attempts to take money from his bank account - charging him £5 each
time - on top of £178 interest. Lord Sugar criticised the FCA's
proposed regulations, saying that the person who drafted them was
"a little naïve".
Meanwhile, the payday lending industry is beginning to fight
back. The Consumer Finance Association, which represents a number
of payday lenders, said that "it is vital to avoid regulating for
the benefit of those who hold strong views, instead of regulating
for the good of consumers who value the transparency, flexibility,
and convenience of short-term loans."And Wonga has commissioned a
feature film based on the stories of 12 satisfied customers.