The £7.5bn payday lending sector will come under fresh attack today when a Labour MP launches a campaign calling for the Government to take a hard line on high-cost credit to stop loan firms “exploiting” hard-up people.
Sheffield MP Paul Blomfield will launch a “Charter to Stop the Payday Loan Rip-Off” in Parliament after being dismayed that new regulatory rules set out by the Financial Conduct Authority (FCA) City watchdog this month failed to tighten the screw on rogue lenders who target the vulnerable.
He said: “Payday lenders are ripping off millions of people, trapping them in spirals of debt. The FCA’s proposals for regulation are a step in the right direction, but they don’t go far enough.”
The charter will call for action to stop payday firms giving loans to people who can’t afford to pay them back. It also demands that lenders are stopped from repeatedly rolling over loans and for there to be an end to hidden or excessive charges.
It also calls for a crackdown on the use of continuous payment authorities – which allow lenders to raid people’s bank accounts – and a crackdown on irresponsible advertising.Anger at the questionable marketing and tactics that payday lenders use to encourage people to take out loans they can’t afford can be gauged by the fact that the charter has gained cross-party support.
It will also be launched in conjunction with Britain’s biggest debt, consumer and anti-poverty organisations, including Which?, Citizens Advice, StepChange Debt Charity, Church Action on Poverty and the Centre for Responsible Credit. Peter Tutton, head of policy at StepChange, said: “Payday loans are pushing more and more people into acute repayment difficulties. This is a dangerous market for financially vulnerable consumers and effective regulation is long overdue.”
More than 30,000 people contacted the charity for help with payday loans in the first half of this year, almost the same as for the whole of 2012.An e-petition has been launched on the campaign website Change.Org.
“We want members of the public, MPs, councils and charities to back the charter and join our call for tougher regulation and enforcement.If this once-in-a-generation opportunity is missed, payday lenders will be able to carry on exploiting people,” Mr Blomfield warned.