A new cap on payday debt will not stop loan sharks making millions from preying on Britain’s poorest, shadow consumer affairs minister Stella Creasy said yesterday. The amount of fees and interest that payday loan companies can charge was limited by the Financial Conduct Authority (FCA) from New Year’s Day. Some campaigners heralded the move, which will stop debt repayments going behind double the original amount borrowed, as a major victory. Consumer group Which? director Richard Lloyd described the move as a “crackdown” that would “stamp out unscrupulous practices.” But Ms Creasy, who has led the campaign against loan sharks in Parliament, warned that the new FCA rules won’t blunt their bite. She said: “The cap on credit coming into force today is just £1 lower than current rates legal loan sharks charge, and still encourages companies to push people into debt by allowing them to profit from default charges. “Little wonder that despite intense scrutiny many of these firms can still make nearly three quarters of a million pounds a week from British customers.” Under the new rules, interest on short-term loans must not exceed 0.8 per cent per day. That means a person borrowing £100 for 30 days who pays back interest on time will be charged around £24. But someone who borrows £100 but struggles to repay their debt will never pay back more than £200, including fees and charges. Ms Creasy pledged that Labour would reform the credit industry if it takes power in May by regulating advertising for payday lenders and promoting credit unions.
Posted on: Sun, 04 Jan 2015 19:08:00 +0000
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