Tue, 1 Mar 2011

MP calls for payday loan regulation

The Government has come under fire for failing to support proposals to regulate payday lenders. Writing on The Guardian’s Comment is Free website, Stella Creasy, Labour MP for Walthamstow, warned: ‘The Government’s failure to support proposals on regulating legal loan sharks will see more people trapped in a cycle of debt.’

A cross-party group of MPs have secured a vote on introducing caps on the total cost of credit for the British consumer. Despite support from a wide range of groups including charities, religious groups and Lib Dem and Tory backbench MPs, the Government has refused to show its support. Creasy wrote: ‘So far the Government has refused to support our proposals, seemingly because of a knee-jerk reaction against regulation. They’ve already agreed to regulate some parts of the market. The coalition agreement promises action on excessive interest rates for store and credit cards.’

A spokesman from Provident, one of the largest providers said: ‘We are pleased the Commons rejected the motion which would have given regulators powers to introduce rate caps. The result would be increased financial exclusion and higher levels of illegal lending because licensed lenders would not be able to recover their costs if prices were reduced. This has all been examined before. The Competition Commission rejected price controls. And money advisers are on the record saying rate caps are not the answer.’