Today’s (Monday 1 July) Downing Street summit of payday lenders will be nothing other than public relations froth unless it commits to clamp down on an ‘out of control’ industry which is now worth between £2.2 and £4 billion a year warned, Britain’s largest union Unite.
As the main players gathered for the summit with consumer affairs minister Jo Swinson, Unite urged the government to cap interest rates and back MP Paul Blomfield’s private member’s bill to reign in the shadowy industry which is pushing thousands of squeezed families into financial ruin.
The majority of countries in Europe, along with Canada, Australia and Japan have all capped interest rates, unlike the UK, where companies like Wonga have a free hand to exploit people in financial crisis by charging a whopping 5,000 per cent in interest or more.
Paul Blomfield’s bill on high cost credit is due before parliament next Friday on 12 July and seeks to reduce prime time advertising of pay day loans. The bill also places a duty on the Financial Conduct Authority (FCA) to control bad lending and debt collection practices.
As well as backing the bill and capping interest rates, Unite is also calling for a Treasury select committee investigation into the size of the payday loan industry and its wider effects on British society, including how and where it pays its taxes.
Commenting, Steve Turner Unite executive director for policy, said: “What we need is action not cosy chats at Downing Street. These legal loan sharks are preying on people who have nowhere else to turn because of shrinking incomes and rising costs.
“It is a scandal that our country lags behind Europe and the rest of the world in capping the extortionate interest rates these pay day vultures charge. This is an industry out of control refusing to put its house in order.
“We know from a survey of our members that many are borrowing on average over £320 a month to make ends meet and are being sucked into the pay day loan trap.
“The cuddly images of Wonga and the promise of fast cash belie the true picture of these rip-off lenders whose lending practices plunge people in to a spiral of debt, as well as debt collection practices which cause alarm and misery.
“These companies should not be allowed to profiteer off the back of people’s hardship. The experience of other countries shows that with proper regulation they can still be viable businesses, but they need to be brought under control.
“We would urge the government for the good of the nation to back Paul Blomfield’s bill, cap interest rates and get a grip of an industry that is blighting communities.”
For further information contact Alex Flynn, Unite head of media and campaigns, on 020 3371 2066 or 07967 665 869.
Notes to editors
Unite is Britain and Ireland’s largest trade union with 1.4 million members working across all sectors of the economy. The general secretary is Len McCluskey.