Makerfield MP Yvonne Fovargue has backed an investigation into payday lenders after it was revealed their use in Manchester has increased fourfold in the last year.
The Office of Fair Trading (OFT) found evidence of a lack of choice allowing firms to profit from loans that cannot be paid back on time nad has referred the entire industry to the Competition Commission.
Critics say the high interest rates take advantage of the vulnerable in a weak British economy where mainstream banks have cut back on short-term consumer lending.
And Ms Fovargue, chair of the All Party Group on Debt & Personal Finance, believes the codes of practice that are in place have failed to protect the vulnerable.
She said: “Payday lenders are dangerously quick to hand out loans in minutes without proper affordability checks being made. The industry is full of predatory firms who have no moral compass and think only of the bottom line regardless of the detriment they cause to many people.
“Voluntary Regulation and industry wide codes of practice have failed spectacularly and Government must now act to ensure that statutory regulation is introduced as soon as possible.”
The OFT said it was difficult for customers to identify and compare the cost of loans, that not all firms complied with relevant laws and that a significant proportion of borrowers had poor credit histories and limited access to other forms of credit.
It said lenders were competing primarily on the availability and speed of loans rather than on the price of paying them back.
And across Manchester, Citizen’s Advice Bureau bosses say the problem is getting to the critical point.
Andy Brown, Manchester CAB’s chief executive, said: “In the last year, the number of people coming to us about problems with pay day loans companies has increased fourfold.
“In one case, we advised a client who had loans with 17 different companies, and he was unemployed and on benefits. He had taken out the loans to try to keep renting his flat after his housing benefit was cut because he was under 35.
“We would always advise people to shop around different lenders to get the best rate they possibly can, and to think carefully before they get further into debt.
“Free advice is available from Citizens Advice, National Debtline and The Consumer Credit Counselling Service, all of which provide information online.”
The OFT said it was difficult for customers to identify and compare the cost of loans, that not all firms complied with relevant laws and that a significant proportion of borrowers had poor credit histories and limited access to other forms of credit.
It said lenders were competing primarily on the availability and speed of loans rather than on the price of paying them back.
In March, the OFT gave Britain’s biggest 50 payday lenders 12 weeks to change their business practices or risk losing their licenses after finding evidence of widespread irresponsible lending. It said it had so far received responses from only 20 of the lenders, five of which have stopped offering the loans.
Citizens Advice has been campaigning and working with pay day loans companies to help improve the services they give to customers, Mr Brown said he welcomed the new customer charter that will be introduced over the next two months.
For more information or debt advice log onto www.citizensadvice.org.uk
Picture courtesy of Henry…, with thanks.
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