The campaigning MP Stella Creasy is taking on the loan sharks. The former Walthamstow councillor believes that expensive credit companies have got away with ruining people's lives for far too long. She says the Government needs to act now before the spending cuts force more struggling folk into a the clutches of the sharks and a potentially disastrous debt cycle.
"I'm very worried that the Government don't get the real problem," Stella says. "The government has to understand that action is needed now to address the high cost of lending which exploits some of the poorest people in our communities who can least afford the charges doorstep lenders set."
The Labour MP is introducing a Ten Minute Rule Bill in Parliament next Wednesday which is designed to ensure that everyone – not just those with good credit ratings – can get affordable credit and is protected from exploitation by legal loan sharks. The Consumer Credit (Regulation and Advice) Bill supports the work done by organisations such as Compass and the End Legal Loan Sharking campaign that we have reported on before in these pages. It's estimated that around 3 million people use the expensive doorstep lending. Typical charges can be as much as £82 for every £100 borrowed, which can be crippling for struggling families.
The Bill seeks to introduce a cap on the total lending rate that can be charged for providing credit, including any late payment and default charges. If such a move were adopted, it would prevent extortion by limiting the total amount that lenders can charge. Alternative government proposals to set an interest rate cap could be a disaster, Stella believes, as it would increase the market for illegal loan sharking.
The MP has a lot of experience with the issue herself, having been a local councillor in Walthamstow for several years. She says she has met many constituents who have fallen into the clutches of unscrupulous loan sharks who simply add interest on to interest so that the cost of borrowing multiplies over and over again.
The Bill also aims to improve access to the credit unions, by integrating them with the Post Office network. There is also provision made for increased funding of debt counselling and advice agencies, and greater powers for local authorities to veto licences for high-street credit agencies. Taken together, the measures aim to tackle the problems associated with increasing amounts of personal debt. We know the problems are only going to get worse after the Government's spending review, so support for the Bill should be wide. But Stella's worried that she won't get the necessary support from her MP colleagues.
Ministers have refused requests for a meeting to discuss her proposals, despite many of them having supported a move to address loan shark problems in 2005. "It's frustrating that my requests for a meeting on this issue have been completely ignored," Stella says. "Five years ago, many MPs who are now government ministers – including Nick Clegg, Danny Alexander and Ed Davey – signed an Early Day Motion which sought to address extortion by doorstep and payday lenders. I want to know why they have changed their minds since then."
The Consumer Credit (Regulation and Advice) Bill will be debated in Parliament on Wednesday, immediately after Prime Minister's Questions.Reuse content