At the Sutton Council meeting on 9 May Councillor Richard Clifton made an impassioned speech about the desperate plight of those who borrow money from loan sharks. He cited cases he had found of people being charged 1 737% for loans, on a day when the Bank of England Base Rate stood at 0.5%.
He called for legal controls on the maximum amount that could be charged for credit. Here is the full text of his speech, contributing to discussion of a motion welcoming the work of the Savers’ Credit Union:
“There are two themes to this motion. First, ensuring those who, for whatever reason, need access to affordable credit can obtain affordable credit, and the motion rightly commends to us the work of the Savers’ Credit Union in achieving this goal.
The second theme is the flip side. It is a much darker theme, and concerns protecting and helping vulnerable people who, perhaps because of the desperate circumstances they find themselves in, take out loans offered at crazy rates of interest by loan sharks, people who offer unsecured loans at high rates of interest to individuals, sometimes enforcing repayment by blackmail or threats of violence.
So can I draw Council’s attention, in particular, to the sentence in the motion:
“ This Council calls on the Government to introduce a cap on the total lending rate that can be charged for providing credit”
I know the problem is not just the level of the interest rate:
* it is sometimes a lack of clarity about the interest rate atall
* it is the way people are targeted, and
* the way re-payment is enforced.
But it is salutary that I looked last week at some websites, found by just typing “loans” into a few search engines. Websites are the top end of the market compared to what is sadly typical, a man touring our social housing estates with a bunch of used fivers in one pocket and a vaguely worded contract in the other.
The websites I found had top banners reading “GET THE CASH YOU NEED TODAY”, and “YOU COULD HAVE £1000 IN YOUR ACCOUNT TODAY”. But if you go on clicking you find the truth.
The first one I looked at had an APR of 51%.
The second had an APR of 1 737%. To make sure I had not mis-read this I checked the site again today, and the rate had gone down. It was only 1 734%.
The DirectGov website quotes examples of over 8 000 %, being charged to people who “GET THE CASH THEY NEED TODAY” because they are already desperate, before they have to face the consequences of taking out these loans. Once they have have taken out loans at these rates of interest they never escape from the spiral of debt
I said “crazy” rates of interest. Why not criminal ? Why should it be lawful to offer vulnerable people loans at these rates of interest on a day when the Bank of England base rate is 0.5%. Some people do try to justify these rates of interest – saying there is a market, these are unsecured loans, the lender has to be protected against bad debts. But there is no justification for such staggering high rates of interest.
I see no reason why some upper limit could not be set by law and enforced.
That would require regulation – a dirty word in some quarters but it is the regulators who protect the vulnerable. And since financial regulation in the UK has such a poor track record it would be good to give the financial regulators a chance to retrieve their reputation.
The motion says “This Council calls on the Government to introduce a cap on the total lending rate that can be charged for providing credit”
I ask you to support the motion.”