Payday lenders ‘trap’ borrowers and bury them under insurmountable levels of debt, according to two Greater Manchester MPs.
The scathing attack was launched by Kate Green, Labour MP for Stretford and Urmston, and Jonathan Reynolds, MP for Stalybridge and Hyde – who also believes that co-operatives were better suited to helping those in debt.
The MPs expressed concerns about payday loan companies that offer borrowers small amounts of money for a short period of time and often have incredibly high annual percentage rates (APR).
Ms Green said: “With interests as high as 2,000% APR I’m extremely concerned that payday lenders are trapping millions of borrowers with unaffordable debts.
“We desperately need to do something about this crisis in unsecured lending. I’m in favour of introducing caps on the amount that payday and doorstep lenders charge for credit.”
Ms Green’s concern stems from figures released by StepChange Debt Charity which placed the Trafford area in the top 25% of constituencies for pay day loan debts.
The figures show that last year constituents in Stretford and Urmston owed an average of £1,817: a rise of 80%.
Mr Reynolds, speaking in a parliamentary debate yesterday, stated that he believed more communities needed to turn to co-operatives to alleviate financial burdens.
“Credit unions only account for a small proportion of the total consumer lending market and when you consider that their average APR is 26.8%, we have to ask why payday loan companies can get away with annual percentage rates of over 4000%. Something has to change,” he said.
Mr Reynolds cited research conducted by Salford University to support his argument.
The research found that for every £1 a council invests in credit unions, there was £10 benefit in retained income for the local economy.
“I believe co-operatives have a part to play economically at every level of society, from families turning to a credit union at their time of need, to the way in which core services are run,” Mr Reynolds added.
Picture courtesy of Phoney Nickle, with thanks.
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