After more than 10 years of campaigning, we were delighted by the announcement this morning that the government is to cap the cost of borrowing from payday lenders.
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.”
Our Coordinator Niall Cooper said at the event:
‘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 facie 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 10years 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 today.
10 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, nay-sayers in the voluntary sector, and the depressing rebuttals of a succession of Government ministers. This is Damon’s response to today’s announcement:
“The Government’s decision to cap the cost of payday loans is an extremely welcome one. But we should remember that it has taken a 14–year–long campaign to get here, and that much more work will need to be done to ensure that Britain’s hard–up households are provided with credit at fair prices. Government must make sure that the proposed price-capping duty for the FCA extends to all forms of high–cost credit. The FCA should now, as a matter of urgency, review the international evidence concerning caps and other measures, including the use of real-time databases of high cost agreements, in order to ensure that consumers in this country are provided with the best level of consumer protection possible.”
The cap on the cost of credit is a vital first step. But more regulation is needed to stop rip-off lenders from exploiting the poorest people in the UK. Please add your support to our Charter to Stop the Payday Loan Rip-off today!