The irresponsible high-cost lending practices of legal loan sharks are coming under sustained scrutiny as these high-cost credit companies prey on vulnerable consumers on low incomes or with poor credit histories, for whom banks and credit cards are out of reach.
The Citizens Advice Bureau is seeing more and more clients who have fallen victim to these unscrupulous lenders, often through doorstep credit and payday loans. The interest rates they charge are usually astronomical with a typical APR of 272 per cent, but the rates can be much more.
For example, the APR for payday lenders often begins at 600 per cent and can escalate to 2500 per cent or more. These incredible rates leave those who borrow from these companies drowning in unmanageable debt.
I am supporting my colleague Stella Creasy, the Labour MP for Walthamstow, in seeking legislative change to take action against these legal loans sharks by introducing caps on the total costs of credit for British consumers. In July, following the pressure that has been exerted through her ongoing campaign, the government finally announced that it will commission new research into the costs of credit for British consumers. It will delay its long-awaited consumer credit review to provide time for the research to take place and hopefully support a change in the law to crack down on high-cost lending.
In the meantime, the first thing anyone struggling with debt problems should do is seek help. Citizens Advice Bureau can give advice and practical support to help people find a way out of their debt. Alternatively, consumers should phone the national Debtline for advice on 0808 808 4000. In practical terms, the primary means of accessing affordable credit is through a credit union.
n Graeme Morrice is Labour MP for Livingston