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As Competition Commission Inquiry Announced, MP calls for Moratorium on Payday Loan Promotion

shark-290x290Welcoming the news that the Office of Fair Trading has taken the decision to refer the whole payday loan industry to the Competition Commission for investigation, Labour and Co-operative MP for Walthamstow, and industry reform campaigner Stella Creasy MP said;

“I’m pleased the Office of Fair Trading has referred legal loan sharking to the Competition Commission for investigation- its time to end the myth that there are a few bad apples and recognise the way the entire industry works is causing problems for millions of British consumers. Legal loansharks have been able to rack up huge profits on the back of British consumers struggling with the rising cost of living and a regulator without teeth allowing 5 years of talking to result in no action. When 80% of these loans are being taken out to just cover the cost of basics like food, rent and travel costs – it’s time to call time on the lax self-regulation of this industry.

The Competition Commission must look not just at individual companies, but also at what a lack of regulatory measures such as a cap on the cost of credit does to the affordability of loans. We know such measures have made a real difference to the market in other countries and the damage payday lending can do to their financial health. Year after year and report after report the widespread damage they are inflicting on consumers has been laid bare and yet still the industry claims it can sort itself out. That’s why we must deal with the root cause of the problem by capping the total cost of credit and so limiting the amount any person can owe on a loan. But this investigation could take up to 2 years – time that British consumers cannot wait before tackling the problems in the industry.

Therefore I hope those promoting these companies will support a moratorium on doing so until we know the outcome of the Competition Commission’s investigations. So too next week these companies have been called into see the Minister – if I were invited to attend I would be asking them and the Government to show they are serious about tackling these problems. The Financial Conduct Authority has the power but not the data to introduce such a cap- if ministers want to show they are finally getting to grips with legal loan sharking in Britain they should demand the industry share its data with the FCA now so that they can set and introduce such a cap without delay. Given the debt and misery involved for those affected by this unfair market its time to put the needs of British consumers first.”

Ask the Lords to have mercy and vote to end legal loan sharking in Britain!

All next week the national press will reveal just how many people’s lives are now being ruined by legal loan sharks in Britain. I’m asking you for help to change this by emailing Lords and Baronnesses to vote for powers to cap their charges this month.
At the end of November, the House of Lords will vote on an amendment tabled by Lord Mitchell to Clause 28 of the Financial Services Bill that will allow the new regulator to cap what these firms can charge. It’s a chance to limit the damage high cost credit companies can do by giving British consumers the same protection that others all over the world enjoy.
New research shows 60% of those using payday loans are using the money to pay for household bills and buy essentials like food, nappies and petrol. With over 50% admitting that they took out these loans despite knowing they could not afford to pay back, capping what these companies can charge could make a real difference to millions across the country borrowing just to make ends meet, and now facing the costs of Christmas.
Please contact members of the House of Lords to ask them to support this amendment. You can find a suggested email text to use and details of their email addresses here. There are 812 members of the Lords and we want to ensure they all know how strongly Britain wants this change – we have less than three weeks to ask them to take this chance to end legal loan sharking in the UK! 
___________________________________________________________________________________
Text to use to write to members of the House of Lords 
 “Lord/Baroness XXXX,
House of Lords,
London,
SW1A 0PW
 
Dear Lord/ Baronness XXXX,

I’m writing to ask you to vote for the pay day loan amendment tabled by Lord Mitchell to Clause 28 of the Financial Services Bill designed to help tackle legal loan sharking when it comes before you at the end of November 2012.

Whilst every other industry has suffered from the recession, legal loan sharks are making huge profits off the back of lending to people at excessive rates of interest – some of up to and over 16,000%. Fines alone will do little to change the way they operate – one firm this year made £45m in pure profit and its main director took home a salary of £1.6m.

Giving the new regulator explicit powers to cap the charges that these companies can set would send a strong message to this industry about the costs for loans that should be considered acceptable. British consumers deserve the same protection from these companies that others around the world enjoy. Research shows 60% of those using payday loans were using the money to pay for household bills and buying essentials like food, nappies and petrol. By restricting what firms can charge, we could make a real difference to millions of families across the country right now who are struggling financially and are borrowing from these companies just to make ends meet.

A poll by ComRes for R3, the insolvency practitioners, shows overwhelming public support for action on this issue with 93% agreeing there is a problem with payday lending and 65% supporting a cap on the total cost of credit. Ministers claim they support the spirit of the amendment but refuse to back it – legal advisors are clear that without explicit powers to act, these companies will be able to challenge any regulatory action in the courts.

Please don’t let the fight against legal loan sharking become a fee generating opportunity for lawyers – please vote for this amendment and help end legal loan sharking in Britain.

Yours Sincerely,”

Red card shown to the legal loan sharks

On Saturday Stella was delighted to join campaigners at the 2012 AGM (Fans’ Parliament) of the Football Supporters’ Federation, where the following motion was debated and passed overwhelmingly:

Fans’ Parliament 2012 calls upon the football authorities across England and Wales to prohibit the promotion through football of ‘payday’ and other short-term loan companies until such time as there is tighter regulation of this industry and a cap on interest rates has been applied.

The motion was only one vote away from being passed unanimously.

Almost all delegates at the AGM were wearing lapel badges showing a referee holding up a red card, with the caption ‘Show Wonga the Red Card’, reflecting the strong feelings held by many football fans about the controversial activities of the firms in the growing payday loans industry and their adverse effects on vulnerable sections of UK society.

The Football League confirmed on 18 June that any commercial relationship with Wonga.com has concluded with the end of the 2011/12 season.

This followed a three month campaign after 25 fans of 18 clubs wrote a letter to the Guardian, which led to a flood of activity on social media, in the press and on the radio.

At the moment Wonga.com still sponsors the shirts of Blackpool FC and Heart of Midlothian.

Stella said:

‘It was great to join all the campaigners at the Football Supporters Federation who spoke up to send such a resounding message to the legal loan sharks. Their message to Football clubs and the Football Association is clear – until this industry is properly regulated their sponsorship money is not welcome in the game. The Football League have already ended their relationship with Wonga – I hope the clubs and the FA will not ignore the views of fans and will send the message that this industry needs to be regulated so that it stops causing misery and debt. Above all this campaign shows that even if the Government won’t listen, we can still take action to protect British consumers – I hope they too will listen to the 300,000 fans who want to show Wonga the red card.’

 

Pictured: Stella with campaigners John Flanagan and Bob Ward, Tom Greatrex MP, and the FSF committee