Don't let loan sharks prey on your money
At the first Council meeting of the new year, next Thursday – at a time when many people will be feeling the squeeze following the festive period – the Labour group will be putting forward a motion that seeks to tackle the problem of legal loan sharking organisations, that are rapidly expanding their operations in the UK, causing problems for many struggling families.
Such operators take advantage of the lack of regulation and growing demand for finance as more and more families struggle to make ends meet.
They have been able to flourish, as since the start of the recession mainstream lenders such as high-street banks have been much less willing to lend money – this leaves growing numbers of people with only recourse to high-cost credit such as payday, doorstep and hire purchase lenders.
Borrowing money is sometimes essential, whether to enable a person to pay for training courses, start a business or to buy a house. The ability to borrow money during a period of need can be extremely helpful to many families.
However, there is a point at which borrowing can become unmanageable, especially if the terms of any loan are high-cost or if the interest rates charged start to rise.
Due to a lack of competition in the market, interest rates for these type of loans are artificially high. The APR for payday lenders often begins at 600% and can escalate to 2,500% or more. And home credit lenders, who make home visits in order to collect repayments for their short-term loans, can charge £82 in interest and collection charges for every £100 lent.
We challenge government ministers to offer credible and detailed proposals for tackling the problems inherent in the high-cost credit sector, for example:
- Introducing caps on the total lending rates that can be charged for providing credit
- Giving local authorities the power to veto licences for high street credit agencies where they could have negative economic or social impacts on communities.
- Promoting credit unions in Medway, as community based organisations offering access to affordable credit and promoting saving
Cllr Vince Maple, Deputy Leader of the Labour Group, who is moving this motion said,
“Though growing levels of personal debt may be in the interests of loan-sharks, it will not help the local or national economy recover, and will only lead to more plight for struggling families across Medway. Since starting to discuss this issue, residents have shared personal experiences with us, including practices like advertising loans borrowed from child benefit or tax credits clearly targeting some of our most financially vulnerable residents.”
“I hope when it comes to being discussed at Medway Council we can see full cross party support for this issue, which if not stopped could see more and more families blighted by this predatory lending culture.”
Notes:
1. The majority of this information was derived from the campaign materials of Labour MP Stella Creasy who has been campaigning nationally for these changes, her background brief on this matter can be found here.
2. The motion we are submitting reads as follows:
Council:
- Welcomes the UK-wide cross party campaign to end ‘legal loan sharking’.
- Believes that the lack of access to affordable credit is socially and economically damaging. Unaffordable credit is causing a myriad of unwanted effects such as poorer diets, colder homes, rent, council tax and utility arrears, depression (which impacts on job seeking behaviour) and poor health.
- Further notes that unaffordable credit is extracting wealth from the most deprived communities.
- Believes it is the responsibility of all levels of government to try to ensure affordable credit for all, and therefore pledges to use best practice to promote financial literacy and affordable lending. This will help to ensure that wealth stays in the local economy.
Council therefore:
- Calls on the government to introduce caps on the total lending rates that can be charged for providing credit.
- Calls on the government to give local authorities the power to veto licences for high street credit agencies where they could have negative economic or social impacts on communities.
- Pledges to promote credit unions in Medway, as community based organisations offering access to affordable credit and promoting saving.
