It's time to cull Britain's legalised loan sharks
Saturday 07 August 2010
A new campaign is fighting to end the problem of legal loan sharking, where borrowers are charged outrageous interest fees.
It hopes to force the Government to ban excessive loan charges and provide alternative sources of credit through community development finance institutions, credit unions and a people's bank based at the Post Office.
The problem of excessive interest rates has been widely reported in The Independent. Annual percentage rates (APRs) of 2,500 per cent or higher are far from uncommon.
To Gavin Hayes, the general secretary of the political pressure group Compass, this is scandalous. "More and more of us are using credit to make ends meet, yet loan companies are legally allowed to charge whatever they like for borrowing money," he says.
"Doorstep lenders are now charging up to £83 for every £100 borrowed, while some online payday loan firms charge 3,000 per cent APR. This is legal loan sharking, a national scandal which must come to an end."
He wants the Government to introduce caps on consumer credit and make sure that the promised people's bank at the Post Office offers people under financial pressure a real alternative. While it is easy to suggest that people should simply avoid borrowing money to avoid being hit by exhorbitant interest rates, in practice millions of people have little choice.
It could be for any number of legitimate reasons that a family needs a few quid to help them get by until payday. Borrowing on overdraft, credit card, or from a doorstep lender can be convenient and fine, until they get into difficulties and cannot repay the debt on time. Then legal loan sharking starts.
"Affordable, short-term credit is needed more than ever to help make ends meet as people face huge cuts in public services, reduced working hours, stagnant wages, and unemployment," says Mr Hayes.
"Yet because millions of people on lower and middle incomes are not catered for by many high-street banks, they have no choice but to borrow at usury rates."
The problem is that penalty charges and interest on interest means a small loan can quickly escalate into a comparatively huge debt, leaving a struggling person with much more difficulty paying it off. For instance, anyone borrowing £100 through a payday loan company may expect to pay only £10 or so for the privilege.
But if they miss the payment deadline, another monthly charge plus interest is added, so the debt could double after just a few months. Capping the credit would cut down the chance of debt spiralling out of control.
It s a problem the Government is aware of but, to date, it seems to have no concrete plans to help the hard-up. Lisa Nandy, the Labour MP for Wigan, who is supporting the campaign, says: "The Government has committed to curb excessive rates on store and credit cards but not high-cost credit. This means the three million people who use high-cost credit will have no defence against excessive profiteering. Is the Government looking out for the middle classes and ignoring the needs of the poorest borrowers?"
Mr Hayes hopes that, with people drowning in debt, millions will join the campaign and force the coalition to act. He is using social networking sites such as Twitter and Facebook to spread the word and urges people to sign a petition at www.endleagalloansharks.org.uk.
*Overspending on a credit card led to Dan McCurry being harassed by debt collectors for more than a year. "I went over my £500 limit on my card by just £3.50 but Capital One charged me a £25 penalty, which I thought was outrageous," says Mr McCurry, 44, a photographer from east London.
"I refused to pay the charge and instead paid off the outstanding balance and interest and cut the card up and sent it back. Capital One then charged me a further £25 a month until they said I owed them £250, which was ridiculous. They then got debt collectors to harass me for a year, and tried to bully me into paying money I didn't owe."
In despair, McCurry, reported the matter to police, only to be told they couldn't intervene "as a matter of policy". "It would have been different if I'd reported an individual for harassment, but because it was a big company with shareholders they seemed to be above the law."
He eventually went to the Financial Services Ombudsman, who effectively ordered Capital One to call off its bully boys. The process left Mr McCurry bitter about lenders. "These companies get away with disgraceful behaviour and have no fear of prosecution," he says. "The worst that will happen to them is a slapped wrist or a small fine."
Derek Pain: I'm cautious, but remain one of the few bulls in the market
Donald MacInnes: Who would want to be a Barbie girl in a non-Barbie world?
Mark Dampier: How to get an income now that savings are past the 'use by' date
Thousands of UK investors could lose out following collapse of Secured Energy Bonds
Bargain Hunter: Fly off for a winter break in France or Portugal for well under £100
- 1 Stephen Fry explains what he would say if he was 'confronted by God'
- 2 Venezuela Expo Tattoo 2015: Extreme body art from 'Vampire Woman' to 109mm earlobes
- 4 Ball pool for adults opens in London
- 5 Canadian woman suing police who locked her in van with sex offender who then raped her
Stephen Fry explains what he would say if he was 'confronted by God'
9 reasons Greece's experiment with the radical left is doomed to failure
Have we reached 'peak food'? Shortages loom as global production rates slow
British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
Liberal Democrat minister defends comments suggesting immigration causes pub closures
Hard line on immigration could cost Tories the election
iJobs Money & Business
£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...
£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...
£13000 per annum: Recruitment Genius: This Pension Specialist was established ...
£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...
Day In a Page
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion