Welcoming 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.”