MPs push for greater controls on payday loans
Andrew Grice has been Political Editor of The Independent since 1998. He was previously Political Editor of The Sunday Times, where he worked for 10 years, and he has been a Westminster-based journalist since 1982. His column, Inside Politics, appears in The Independent each Saturday.
Wednesday 07 March 2012
MPs have demanded a new law to rein in companies offering high-cost, short-term payday loans to stop them exploiting vulnerable people.
In a report published today, the all-party Commons Select Committee on Business warns that tightening the credit industry's codes of practice will not work and urges the Government to consider statutory controls on payday loan and credit management firms. Their inquiry follows campaigns, including one by The Independent, for a crackdown on lenders accused of preying on people such as benefit claimants and then "rolling over" loans they were never likely to pay back, so they pile up huge debts.
The committee called on Tony Hobman, chief executive of the Money Advice Service funded by financial firms, to take a cut in his £350,000-a-year pay and bonus package, which includes a £250,000 salary. "At a time of pay restraint, we do not believe the head of a comparatively small organisation should receive a salary £100,000 in excess of the Prime Minister," says its report. "The perception of such extravagance does not sit easily in an organisation tasked with helping those in debt."
The MPs are "confused" by the Government's claims that face-to-face debt advice would not be reduced even though legal aid for such help is being cut by 75 per cent. They express concern that the decision to remove the Social Fund, which provided emergency loans, could drive people into the arms of loan sharks.
Adrian Bailey, the committee's Labour chairman, said that at a time when growing numbers of people are relying on payday loans and debt management services to make ends meet, the industry remained "opaque and poorly regulated." He criticised the Government for not acting on a consultation exercise that ended almost a year ago, and called for "swift and decisive action to prevent firms abusing the needs of such a vulnerable customer base."
The committee says that credit adverts should no longer show the APR (annual percentage rate) but should make clear the total cost, including interest and fees. "If it cannot be demonstrated that self-regulation can deliver the necessary protections then the Government will need to intervene with statutory regulation," says the report.
Other demands put forward by the MPs include higher licensing fees for higher-risk credit firms and a fast-track procedure for suspending credit licences.
- 1 Avengers: Age of Ultron: Nearly 700 German cinemas refuse to show movie
- 2 Donald Trump decides that Baltimore riots are Barack Obama's fault
- 3 X Factor in crisis as numbers of people auditioning plummets
- 4 General Election 2015: Stephen Hawking says he will vote Labour
- 5 Baltimore riots: Furious mother marches her son home live on TV
Bali Nine executions live: Indonesian firing squad shoots dead eight drug offenders despite outcry around world, but a ninth is spared
Keith Harris dead: Orville the Duck ventriloquist dies aged 67 following battle with cancer
The four utterly contradictory polls that tell the story of this election and why it is pointless trying to predict the outcome
Donald Trump decides that Baltimore riots are Barack Obama's fault
General Election 2015: Prospect of Labour-SNP coalition makes one in four voters less likely to support Ed Miliband, says survey
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband
The sickening truth about food banks that the Tories don't want you to know
Aaron and Melissa Klein: Oregon anti-gay bakers ordered to pay $135,000 after refusing to make cake for same-sex wedding
EU exit would hit UK economy much harder than neighbouring countries, study finds
Andrew Lloyd Webber: Phantom of the Opera writer mocked after issuing a warning about Ed Miliband and Nicola Sturgeon
General election 2015: Labour will toughen hate crimes legislation surrounding Islamophobia
£23000 - £25000 per annum: Recruitment Genius: This firm of accountants based ...
£30000 - £38000 per annum: Recruitment Genius: They are a financial services c...
£30000 - £32000 per annum + car allowance and on call: Ashdown Group: A succes...
£15000 - £17000 per annum: Recruitment Genius: Well established small company ...