The ‘crackdown’ on payday lenders’ abuses is too weak and will take too long to implement, Unite, the country’s largest union, said today (Thursday 3 October).
Unite called for interest rates on payday loans to be capped immediately, as is the case in Canada and many states in the USA.
Unite also said that the proposals from the Financial Conduct Authority (FCA) - the organisation set up to protect consumers – won’t come into force until next summer – giving payday lenders, such as Wonga, more time to make millions from some of the most financially vulnerable in society.
Unite general secretary Len McCluskey said: "The loan sharks will have a smile on their face today because these measures are too little, too late.
"They fail to deal with the real reason people who borrow from a payday lender end up in deep financial trouble, which is the criminally high interest rates these lenders can get away with.
“The proposals, while welcome, just tinker at the margins. They also fail to address the reasons people fall into hardship and the clutches of payday lenders.
"Our own research shows that people are borrowing an average of £660 a month to get by, not for luxuries but necessities, but are then sucked down into a spiral of debt by the painfully high interest rates these payday vultures charge.
"The government's failure to act swiftly on payday lenders who have racked up enormous profits on the back of human misery and stress is shameful.
“We are forced to conclude that their lightness of touch comes about because of their close relationship with the lenders, and Wonga in particular. Indeed a payday lender advises the prime minister, a massive conflict of interest if ever there was one.
"It seems that the message of today is that as long as there is a Tory in number 10 then the payday lending industry in this country will be the most poorly regulated in the western world and the sharks will be free to rip off the UK public."
Len McCluskey was also concerned that, although the FCA takes over in April 2014 regulating the payday lending industry, it won't actually be able to tackle the abuses until July.
The Unite leader added: “Action should be taken now to get to grips with the worst abuses of this industry. Ministers should not allow this industry to continue to rip off the financially vulnerable before even these weak measures come into force.”
An independent survey for Unite conducted by Mass1 of 4,087 Unite members in August showed people were borrowing £660 a month compared to £328 in September 2012. The figure has more than trebled from the £200 being borrowed in March 2012.
A total of 67 per cent of those members surveyed, who say that they must borrow, run out of money by the third week after they are paid.
For further information please contact Unite senior communications officer Shaun Noble on 07768 693940
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.