A new campaign has been launched urging the Government to crack down on irresponsible payday lenders.
Payday lenders are under attack again, this time from a cross-party campaign made up of MPs, consumer groups and debt charities.
'The Charter to Stop the Payday Loan Rip-Off' is being launched today to highlight the irresponsible lending carried out by some of these companies.
It has been created in response to the Financial Conduct Authority’s (FCA) proposals for regulation of payday lenders, which it claims don’t go far enough.
Rip-off payday lenders
The campaign group says payday lending and other high cost credit is “damaging the health and wealth of the country”. It says self-regulation has failed as these lenders have broken the rules set forth in their own Consumer Charter.
Paul Bloomfield, Labour MP for Sheffield Central, who has been spearheading the campaign to get a private member’s bill through Parliament, is heading up the Charter.
He said: “The FCA’s proposals for regulation are a step in the right direction, but they don’t go far enough. We want members of the public, MPs, councils and charities to back the Charter and join our call for tougher regulation and enforcement.
"If this ‘once in a generation’ opportunity is missed, payday lenders will be able to carry on exploiting people.”
Several other MPs are also involved, along with major organisations such as StepChange, Church Action on Poverty, Centre for Responsible Credit, Citizens Advice and Which?.
“Over 30,000 people contacted us for help with payday loans in the first half of 2013, almost the same as for the whole of 2012,” explains Peter Tutton, Head of Policy for StepChange.
“New rules from the FCA are a step forward but key controls are missing. The Charter sends a clear message: We need stronger limits on runaway debt and real-time enforcement to truly get on top of harmful lending,” he adds.
Make sure your money lasts until payday by making use of the lovemoney.com budgeting tool MoneyTrack
Campaign Charter
[SPOTLIGHT]The campaign has laid out a number of actions it wants the Government to enforce. It is calling for payday lenders to be stopped from giving loans to people who can’t realistically afford them and to be banned from repeatedly rolling over loans.
Hidden or excessive charges should be axed and payday lenders shouldn’t be allowed to take money from a borrower’s bank without their knowledge.
The advertising of payday loans also needs to be made more transparent and lenders should offer free independent advice.
Credit unions need to be promoted and supported as a viable alternative way for people to borrower money. The banks need to lighten up their credit restrictions and start lending to more people on low and middle incomes.
The Charter is being launched today in Parliament and members of the public are being urged to sign an e-petition on Change.Org to encourage the Government to outline stricter rules for payday lenders.
Find a better way to borrow with the lovemoney.com personal loan comparison centre
Alternatives to payday loans
We’re bombarded with adverts for payday loans; if it’s not a TV advert claiming to transfer money within minutes it’s a harassing phone call or SMS message.
But some of these companies charge interest rates of around 5,000% on a loan. On top of this they’re continually in the headlines for misleading advertising, unclear terms and conditions and lending money to people who won’t be able to repay the loan.
Credit Unions are a strong contender when looking for alternatives to the payday loan market. Along with current accounts, savings products and standard loans, some offer short-term loans, usually paid back in three to six months, at much lower rates than the payday lenders. The Government and the Church of England have pledged their support towards them and an expansion project is currently underway to boost this area of the market. Read UK credit unions take on the payday lenders
Free debt advice, from a charity such as StepChange, National Debtline or Citizen’s Advice, is the first place you should look if you’re struggling with money. These charities can offer confidential, free advice and can supply free debt management plans to help you get back on track.