MP David Wright backs action on doorstep lenders
Monday 15th November 2010, 8:14AM GMT.
Telford MP David Wright is backing a fellow Labour MP who secured an adjournment debate on consumer credit regulation.
Mr Wright is backing the call for more action from the Government to tackle the problem and is also highlighting the number of Credit Unions in Telford where local people can save and get cheaper credit.
Stella Creasy MP secured the debate recently.
Mr Wright said: “Some loan and credit companies are charging annual interest rates equivalent to over 2,500 per cent despite the Bank of England base rate being just 0.5 per cent, whilst some door to door lenders charge up to £82 for every £100 borrowed.
“Borrowing at these rates repeatedly tips customers into inescapable cycles of debt and poverty.
“High debt repayments are linked to rent, council tax and utility arrears, constraints on job seeking behaviour, poor diets, cold homes and mental and physical health problems.
“The last Government made a good start on tackling this scandal by working with Trading Standards Officers and local councils, but we still need to do more.
“With Christmas approaching, I want everyone in Telford to be vigilant and report loan sharks.
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I genuinely wish him well with this – loan sharks are nothing more than parasites.
He might face some opposition from within his own party though, seeing as two of the largest doorstep loan companies have pumped thousands of pounds in sponsorship money into the Labour Party Conference over the years, and provided “hospitality” to a number of Labour MPs.
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Loan sharks are parasites, but let’s remember that not all people have the means to save and meet credit union criteria; for them, the only person willing to lend is their local shark.
And personally, I don’t regard the companies lending at 2,500% to be sharks. They are regulated and they don’t lend without a contract being drawn up, so the customer is well aware of what they’re getting into. And if the customer defaults, they may chase their money, but it will be done in a manner that the law prescribes. The high interest rates merely reflect the risky market into which they are lending.
A loan shark on the other hand, will often use methods that are, in the end, illegal. And all the guff about a loan shark loan being unenforceable because it’s not been made under consumer law is naive nonsense – that’s the point of illegality, it’s not covered by the law and Trading Standards and local government will never be able to stop financial outcasts going to their “lender of last resort”. (And these are people who, on the whole, won’t even be able to get a loan from a credit union – they may be unions, but they’re not stupid enough to lend to people who won’t voluntarily pay the money back or who never paid back a previous loan.)
In the end, David Wright and his fellow MPs who are pushing for this legislation would be better off NOT pushing legitimate credit companies, no matter how much they charge to high-risk clients. To curb their legal activities would merely ensure that more dangerous sharks with no morals or legal supervision stepped into the vacuum created.
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