Call for community finance fund
Campaigners will today mark a new cap on payday loans by calling on the Government to set up a community finance fund.
New rules from the Financial Conduct Authority will require lenders to cap their interest rates at 0.8% a day, charge no more than £15 for a default, and never charge a customer more than twice the amount they originally borrowed.
Wonga, the UK's biggest payday lender, has responded by imposing a cap on the cost of its short-term loans.
A group of campaigners will gather outside Wonga's London offices to make sure firms respect the new cap, and urge the Government to launch a community finance fund, paid for by fines levied on banks and payday lenders.
Community organising charity Citizens UK, which has been campaigning for a cap on credit for more than five years, is urging people to join local credit unions to access loans.
Bishop of Stepney, and Citizens UK trustee the Rt Rev Adrian Newman said: "Today sees the hard work and tireless campaigning of many groups, including Citizens UK, bear fruit as the usurious rates used by a raft of payday lenders are capped.
"Debt and money worries are a real issue for countless families across the country. We hope that the introduction of the cap on credit charges will help halt the cycle of debt that can so easily happen when using the services of some payday lenders.
"We know that people will still need to access short-term loans. That's why we have committed to promoting local credit unions, pledging to sign up 10,000 new members over the course of the next parliament and asking Government to establish a community finance fund, paid for by fines levied on banks and payday lenders."
Colleen Beasley, Citizens UK member from St John's Church in Hoxton, east London, said: "I became involved in the campaign for a cap on credit because I myself was a victim of these charges. It's an embarrassing situation to find yourself in, but the relentless charges and fees meant my original, relatively small debt quickly spiralled out of control.
"Being in debt and knowing that the debt is growing is a frightening and frustrating experience, I felt powerless to tackle it. That has a serious influence on your confidence and general well-being. Thankfully good friends were able to help me.
"I'm now a member of my local credit union, and would advise anyone to join one. Many credit unions offer payday loans, and if you don't need one, then at least you know your money is being used ethically."
Citizens UK and the Church Credit Champions Network are running a series of credit union sign-up sessions, encouraging more people to join.
David Barclay of Church Credit Champions Network said: "We've come out to Wonga HQ in our array of caps to both celebrate the new regulation coming into force, but also as a reminder to all payday lenders that civil society will be keeping a close eye on the high street lenders in their communities to ensure they follow the new guidance."