Welby welcomes tough action against payday lenders

by
08 March 2013

by Roberta Miller

PA

THE Archbishop of Canterbury has welcomed an announcement by the Office of Fair Trading (OFT) that it will take tough action against payday lenders.

The OFT announced on Tuesday that the "leading 50 payday lenders" would be given "12 weeks to change their business practices or risk losing their licenses". It said that it had uncovered "widespread irresponsible lending and failure to comply with the standards required of them".

Archbishop Welby said on Tuesday: "I warmly welcome the action taken by the OFT, which will contribute to improved access to affordable finance across England. In the longer term, in order to ensure that all members of society have access to affordable credit and other financial services, the development of credit unions and other forms of local finance is essential."

Speaking in the House of Lords last year, when he was Bishop of Durham, Archbishop Welby had described the rates charged by payday-loan companies as "clearly usurious" ( News, 30 November 2012).

The director of the Church of England's Mission and Public Affairs team, the Revd Dr Malcolm Brown, praised the OFT's announcement on Tuesday. It "clearly shows that there are deep-seated problems with the way the whole payday-loan market is operating at the moment. Many borrowers are already in a financially precarious position, and, all too often, payday loans are making their situation worse."

The Church's investment bodies do not invest in payday-loan companies and other high street lenders, a statement from Church House said, "because of concerns about the exploitation of vulnerable and low-income customers".

The Association of Christian Financial Advisers (ACFA) issued a statement on Wednesday calling for a maximum interest rate, and a ban on roll-over credit "to protect the poor and vulnerable from exploitation".

Aidan Vaughan, a spokesman for the ACFA, called for codes of good practice, "including guideline interest rates, which should then be clearly displayed on any advertising, to stop manipulation and exploitation of low-income households".

The OFT said: "Too many people are granted loans they cannot afford to repay, and it would appear that payday lenders' revenues are heavily reliant on those customers who fail to repay their original loan in full on time."

Abbie Shelton, of the Association of British Credit Unions Limited (ABCUL) said: "It is very unlikely that very short-term loans of a few weeks will be the right solution for most people, because this only stores up problems for later. If a loan is needed, spreading repayments over a few months will usually make more sense.

"Credit unions can also help people to look at their finances and get into a savings habit, so that they do not have to rely on a short-term loan next time they are short of money."

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