The Community Development Finance Association has welcomed a Government commitment to amend the Financial Services Bill.
The new legislation will give the new financial regulator, the Financial Conduct Authority (FCA), the power to cap interest rates on payday loans.
The Government had faced a possible House of Lords defeat last night over an amendment put down by Lord Mitchell, which was also signed by Lord Welby, the incoming Archbishop of Canterbury.
The government will now introduce its own amendment to the bill next Wednesday.
CDFA’s chief executive Ben Hughes said:
“Take up of payday and high interest loans has soared and many are being used to pay for household essentials such as food and travel to work. It’s easy for some commentators to blame the poor and disadvantaged for finding themselves in a spiralling problem of debt, but with economic pressures on households, and aggressive marketing from high interest loan providers, many have turned to these providers simply to try to get by.
“The United Kingdom should be ashamed for having allowed extortionate high interest lenders to proliferate and profit from customers’ misery for so long.
“It was naive and disingenuous to believe that the high interest and payday loan industry – already censured by the Office for Fair Trading which said last week that it is concerned about poor practices, including failure to assess whether borrowers could repay loans – could self-regulate in consumers’ interest. CDFA welcomes the Government decision to give the new financial regulator a clear power to protect consumers from extortionate interest rates.
“Now we want to see how this will be implemented – and ensure that this also comes with more recognition and support for community finance providers and credit unions that do offer ethical and affordable finance to disadvantaged households, but whose message is drowned out by the enormous advertising budgets of the legal loan sharks.
“Clipping the fins of ‘legal loan sharks’ is long overdue. Through our members we look forward to continuing to provide ethical and affordable finance.”
- CDFA joins calls for high interest loan cap
- Community development finance institutions (CDFIs) have been helping vulnerable, disadvantaged and financially excluded people by providing financial advice, education, and affordable credit, for over 10 years. Find your nearest CDFI at www.findingfinance.org.uk
- Last week payday lenders were warned by the Office of Fair Trading that they need to change their behaviour or face closure