Unite, Britain's biggest union, has welcomed the Office of Fair Trading's (OFT) unprecedented report which has found that 90 per cent of the payday loans market, were failing to comply with the standards expected - the OFT wants the entire industry referred to the Competition Commission.
Unite says this is more proof that the government's new rules for payday loans companies will do little to help people falling into a spiral of debt and that the government must cap the extortionate interest rates charged by these legal loan sharks.
Payday lenders face new rules on how they advertise. The government's plans include limiting the number of adverts firms are allowed to put out per hour, the times they can advertise and making sure that interest rates are clearly displayed. However, the government has refused to cap the extortionate interest rates the lenders are allowed to charge - the major problem which lies at the heart of the pay day loans industry.
The Labour leader Ed Miliband has committed to capping interest levels, while the Tories won’t.
Unite general secretary, Len McCluskey said: "The OFT wants the entire legal loan shark industry referred to the Competition Commission. It understands the seriousness of the debt problems caused by payday lenders, but the government refuses to face up to the problem.
"The government's new rules do not go far enough to properly regulate payday loans. The toxic combination of shrinking wages and rising costs is drawing more people into the clutches of these legal loan sharks. The government must cap the extortionate interest rates that payday lenders charge to help stop desperate borrowers falling into a spiral of debt. There also needs to be new rules to rein in these lenders' aggressive collection methods.
"Controlling how much legal loan sharks are allowed to advertise is not good enough. They shouldn't be allowed to advertise on TV at all, nor should they be allowed to sponsor large events or football teams which can end up being associated with companies that exploit local communities.
"From April, more people will be likely to turn to payday lenders as the government scraps the Social Fund which was there to help with living costs for people struggling on benefits. The rise of payday lenders on our high streets was caused by this government - it needs to do much more to stop companies profiteering from the misery of Tory economics."
The OFT found evidence that the 50 lenders, which account for 90 per cent of the payday loans market, were failing to comply with the standards expected.
Contact: Ciaran Naidoo on 07768 931 315
- Notes to editors: Unite is Britain and Ireland’s largest trade union with 1.5 million members working across all sectors of the economy. The general secretary is Len McCluskey.