Capping the cost of credit – a victory 10 years in the making

Almost 10 years to the day from Debt on our Doorstep’s lobby of parliament, the Government yesterday announced it has finally agreed to introduce a cap on extortionate cost of payday loans.

Debt on our Doorstep, a national network for fair finance, held a Debt Lobby and Action day at Parliament on Tuesday 3 December 2002 to protest against extortionate lending. Hundreds of people carrying inflatable sharks lobbied MPs to make their point clear. The event was billed as

“an attack on legal ‘loan sharking’ by finance companies who target the poorest in our society. Over 3 million people, mostly on low income, are currently reliant on credit offered by doorstep lenders at interest rates in excess of 160% APR.”

End extortionate lending: Shark attack on Parliament:, 3 December 2002

My words at the launch of the event were as follows:

‘If the government is really serious about tackling poverty and the blight of debt, then it must act now to tackle the extortionate interest rates that loan companies are allowed to charge and by making available low cost finance to those most in need. Without action on high cost credit, pledges to eradicate poverty are nothing more than empty promises.’

The lobby was followed up by a report from Richard Murphy, arguing the case for an interest rate ceiling, based on a forensic analysis of the business model of Provident Financial, and concluding there was prima face evidence of market failure in the sector.

In 2004, Radio 4’s Moneybox programme joined the campaign, with Paul Lewis presenting a half our expose of extortionate lending. In spite of a growing clamour in parliament and the media, the Department for Trade and Industry remained resolutely opposed to caps.

In 2005, as a result of lobbying by Debt on our Doorstep and the National Consumer Council, the  Competition Commission launched an Inquiry into the Home Credit sector, which we submitted both written and verbal evidence to in person.  The Inquiry concluded that there was indeed market failure, at a cost to customers in excess of £500 million over the period 2000 to 2004.

In 2006, the Competition Commission concluded that it was ‘minded to consider a price cap on home credit loans’ if it appeared likely that its other remedies were not proving effective.

Sadly, the past ten years has seen a growth of even more pernicious forms of extortionate lending, not least amongst them payday lending, at rates of interest of up to 4,000%apr.

And sadly, in spite of mounting evidence of the damaging impact of extortionate lending on millions of low income households, successive Governments – under intensive lobbying from powerful business interests – have set themselves against capping the cost of credit – until yesterday.

Ten years on, victory is sweet indeed.

Credit for this victory rests with many who have supported and given the campaign fresh impetus along the way, not least Stella Creasy MP, who has championed the cause since being elected to Parliament in 2010.  But most of all to Damon Gibbons, Director of the Centre for Responsible Credit who co-founded Debt on our Doorstep 13 years ago. Damon has held alight the flame through thick and thin, refusing to bow to the pressures of industry lobbyists, naysayers in the voluntary sector and the depressing rebuttals of a succession of Government ministers.

Damon Gibbons has also shared his own reflections on the past 10 years – and the challenges in making the cap on the cost of credit stick – here.

2 thoughts on “Capping the cost of credit – a victory 10 years in the making

  1. Excellent – well done to everyone involved.
    I know how it feels to ‘hold the flame alight’, having been pushing for true welfare reform through the Community Allowance since 2001. That campaign – which would allow people on benefits to do short-term, part-time or sessional work that is good for the neighbourhood without losing their benefits – has still not been achieved. But my other long-suffering passion has been to save Hastings Pier, and that reached a great climax this month when Heritage Lottery agreed a grant of £11.4m after six years of dogged persistence by local people.

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