MPs back campaign to end 'legal loan sharking'
More than 100 MPs have backed a campaign calling for the Government to end 'legal loan sharking'.
Around 107 MPs from all major parties signed an Early Day Motion calling for a cap to be put on the interest charged on some of the most expensive forms of credit.
The campaign, which is being organised by political pressure group Compass, said that although the Government has pledged to give regulators new powers to define and ban excessive interest rates, it is failing to tackle the high-cost credit sector.
The high-cost sector, which includes doorstep lending and payday loans, is typically used by people on low incomes with no access to mainstream credit.
The rates charged on pay-day loans can be as high as 2,600% on an APR basis, while doorstep lenders or home credit groups often charge the equivalent of 272% a year.
Compass said the payday loan and pawnbroker business is worth around £2bn a year.
Gavin Hayes, general secretary of Compass, said: "A cap on the cost of credit is supported by seven in 10 people and it now also has support from all sides of the House." The Early Day Motion not only calls on the Government to cap the interest rates that companies in the high-cost credit sector can charge, but it also wants it to provide alternative affordable sources of credit through the post office network, as well as through credit unions, co-operatives and mutuals.
The Centre for Responsible Credit and Compass also called on the Government to introduce similar protections for UK borrowers using pay-day lenders to those in force in the US and Canada.
The groups said regulators in those countries had not only introduced caps on the amount that lenders could charge, but had also limited the amount of money that could be advanced to 25% of the borrower's income.
In addition, lenders were prohibited from repeatedly 'rolling over' old loans into new ones, while they also had to share information with other lenders in the sector to ensure borrowers were not taking out multiple loans.