Number of payday lenders in UK doubles in last 4 years

A summit to tackle payday loans in Britain has been slammed as sham as the government rules out capping the exorbitant lending costs, local media reported. .

MPs have been accused of failing to safeguard the UK’s poorest and most vulnerable by refusing to properly clamp down on unscrupulous payday loans company.

Consumer Affairs minister Jo Swinson was holding a meeting with payday loan firms, regulators and charities on Monday to look at how to rein in the £2billion industry.

But Swinson admitted a day earlier that they would not be discussing introducing a cap on interest rates or the total amount a company could charge.

The number of payday lenders has doubled in the last four years with firms charging annual interest rates of more than 5,800 percent on some loans.

Swinson said she wants to stamp out any “irresponsible behaviour” by the industry.
But she added: “Some people say we should just cap the interest rates.

“But that could shut down short-term loans and force people towards illegal loan sharks or other extreme measures.”

Labour MP Stella Creasy, who has been at the forefront of campaigns to rein in the industry, said a cap on the total cost of lending was the only way to protect vulnerable people.

She said limits on lending costs were in force in most other countries but the government was refusing to even discuss the idea.

“Having a summit on payday lending without talking about a cap is the same as holding summit on arson and not mentioning matches,” she said.

The Office for Fair Trading has written to 50 payday lenders giving them 12 weeks to prove they are up to scratch or risk being put out of business.

So far five lenders have told the watchdog they have left the payday market, including two which have surrendered their licences.

Which? executive director, Richard Lloyd, said the consumer group wants to see more action from government to tackle the “toxic market”.

“We want new rules banning excessive charges, a restriction on the number of times a payday loan can roll over and clearer advertising to help people struggling with spiralling debt”, he said.

Labour Treasury spokesman Chris Leslie MP added: “Urgent action is needed to grip the regulation of the payday loan industry, as the number of cases of misery and hardship are growing rapidly because of pressures on living standards and personal finance.

“The government have consistently ducked clamping down on predatory pricing and extortionate interest charges – despite Labour securing an amendment in the House of Lords last year which gives regulators the ability to control costs and loan duration.”