shark

Responding to today’s publication of the full OFT report into the payday loan industry which is seeking to refer the entire industry to the Competition Commission , Stella Creasy MP said;

“This report is a damning indictment of the Government’s failure to act on this market. Despite three years of warnings, under their watch its now clear legal loan sharks are out of control in Britain and our consumer credit market urgently needs meaningful reform. The best way to prevent the problems payday lending causes is to cap the costs of credit, so that people do not get into debt in the first place.  So whilst announcements on credit checking and advertising will help limit the damage these loans do, the Government is still ducking the real issues.

For too many consumers, the only people who will lend to them at the moment are these legal loan sharks. There is no competition for their business. That is why a cap on the total cost of borrowing makes more sense than relying on affordability assessments which leave lenders to decide what consumers can pay. The Government is clearly out of touch with the way this industry works and is giving it a free pass to push millions more into debt by not setting out what a is fair price for credit as they do in most other countries.

The OFT must be given clearance to refer this industry to the Competition Commission and the Financial Conduct Authority (FCA) must now act to urgently review the protection of British consumers so that they can benefit from the setting of a fair price for credit - just as we see in many other countries.

It is not the legal loan sharks’ advertising campaigns that are causing the real problems for British families struggling with the cost of living: it is their interest rates. And if this Government will not act to protect consumers now, we know a future Labour Government will.”

The publication of the full report by the OFT is yet just another in a long line of investigations to report about the payday loan industry. Below you can find details of each of the reviews and reports that have been commissioned and published over the past 3 years.

Stella Creasy MP is calling on #sharkstoppers campaigners to urge the Financial Conduct Authority to launch their own urgent research into the implementation of a total cost cap and back the referral of the payday loan industry to the Competition Commission by the OFT. The National Audit Office’s own work shows the failure to address this issue cost UK consumers £450m last year.

Ends.

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Notes

  • The OFT review into payday lending began in February 2012 – the interim report being released in November – reporting 5 years after the first initial investigations into the industry began.
  • In 2005 the number of estimated payday loan customers was 250,000 – by 2011, Policis estimated payday lending was used by 1.3 million individuals – 70% of whom were low-income users.
  • By 2011 Key Note estimated the total value of the UK Payday loan market had grown from £735 million in 2007 to £2.34 billion in 2011. Today’s OFT report places that figure now at £3bn.
  • Research by R3, the insolvency practitioner in November 2012 showed 5 million adults in the UK are considering taking out a payday loan in the 6 months to May 2013.
  • Research shows 60% of people who took out payday loans were using the money to pay for household bills or buying essentialslike food, nappies and petrol.
  • In both February 2011 and June 2011, the Government opposed tougher regulation of the high-cost credit sector and refused to support legislation to introduce a cap on the costs of credit.
  • The Money Advice Trust earlier this month reported a 94% increase for 2012 in complaints relating to payday loan companies – equating to a 4,000% increase since 2007.
  • The  Financial Ombudsman Service has reported upholding around 72% of all payday loan complaints in favour of the consumer.
  • In February 2011, Stella Creasy MP and 14 other MPs wrote to Ed Davey, the then Minister for Consumer Affairs, demanding the Government take action to protect the poorest consumers in Britain by capping the total cost of credit.
  • Research into the application of total cost caps in Japan has shown that the number of borrowers has not reduced – but the average amount of their debt borrowed from lenders has. For more information on total cost caps – contact Damon Gibbons at the Centre for Responsible Credit.
  • Stella Creasy MP has been campaigning for caps on the cost of credit since 2010. You can find more details on her campaign hereFor more details on the #Sharkstoppers campaign to tackle legal loan sharking in the UK visit Stella Creasy MP’s websitewww.workingforwalthamstow.org.uk ; or call Jon Chambers on 020 8521 1223.

 



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