Tag Archives: High Cost Credit

FCA Lets Sharks Off the Hook as Cost Cap Set Too High Warns MP

Responding to today’s announcement of the level set for a cap on high cost credit agreements by the Financial Conduct Authority Labour’s Shadow Competition and Consumer Affairs Minister, Stella Creasy MP, said:

Today’s news will be welcomed as an early Christmas present for Britain’s legal loan-sharks. This cap is just £1 lower than their current charges. This is an industry where some firms are making nearly three quarters of a million pounds a week from British customers- such a high cap will do little to tackle these rip off charges.

We’ve warned regulators this cap needs to be much lower to really change the behaviour of these companies, but today’s announcement shows they are still not listening.  Other countries are much stronger at taking on lenders. Borrowers in countries like Japan, Australia, Canada and parts of America all have better protection from being preyed on by these companies, showing what can be done to end legal loan-sharking.

This year debt charities and the financial watchdog have reported rises in cases involving payday loans causing problems for consumers, showing just how toxic this industry is for many. Today’s announcement means yet again these sharks have slipped through the net.

We have already seen many of these lenders try to evade capture by changing the names and nature of their product. Two years is too long for consumers to find out they are still being ripped off in this market. The FCA must commit to reviewing the level of the cap and what it covers within a year to ensure it reaches a more effective level.”

Notes:

1. Stepchange debt charity saw a 42% rise in payday loan cases this year with 13,000 more payday loan borrowers seeking help in the first half of 2014 compared with the same period in 2013 – http://www.stepchange.org/Mediacentre/Pressreleases/paydayloanproblemsonrise.aspx

2. The Financial Services Ombudsman received double the number of complaints about payday lenders in 2013-14 than in the year before and found against lenders in two-thirds of case: http://www.financial-ombudsman.org.uk/news/updates/2014-payday-loan-debt.html

3. A cap of 0.8% per day means companies can charge £24 per £100 borrowed.  In its market study the OFT found the average cost of providing credit to be £25 per £100 meaning many firms were offering it at much lower costs.

 

#smartspenders: Reforming Britain’s Consumer Rights Legislation

unnamedThis month the Government announced plans to bring forward its Consumer Rights Bill. As the Shadow Minister for Consumer Affairs, I will be leading Labour’s response to these proposals in the coming months both in parliament and in our campaigns.
At present, this piece of legislation offers little to prevent the many problems consumers in Britain face; concerns which are leading to debt and distress for too many not just in Walthamstow but across our country. As the person leading on this for Labour, my role is to put forward alternative legislation and seek to persuade the Government to change their plans to match these ambitions instead. If we are successful, as we were with the payday lending proposals, I believe this could help the public get a much better deal for a wide range of goods and services and help rebalance our economy.
So far the signs that the Government will listen to concerns about how consumers are being shortchanged and how we could address this are not good. You can read my speech in the second reading of this legislation in parliament here . As you can see, the Government ruled out taking action on a wide variety of problems that are causing real financial difficulty for many- from extortionate fees for pensions, banking and housing, to persistent dodgy builders and rogue second hand car traders, ticket touts, nuisance callers, premium rate phone lines and copycat websites which charge fees for free public services. The Government don’t seem to understand that tackling everyday rip offs like these could help millions of people to reduce their overall cost of living and better manage their finances.  If we could all save just £3 a day from our expenses, by the end of a year we’d be £1000 better off- enough to cover the estimated annual cost of unexpected bills!

We want to try to change their minds on ignoring these problems- but we need your help to make them listen and to tell the truth about the sharp practices consumers are facing. We want them to realise how important it is to rewrite their Consumer Rights Bill so that it gives real consumer powers to us all. You can find out how you can help the #smartspenders campaign here – to sign up to be part of this campaign please email me on stella@workingforwalthamstow.org.uk.

 

Fantasy Film Released as Wonga claim Legal Loansharking is a Wonderful Life

moneyshop1Commenting on the release of a promotional film for legal loanshark Wonga today, Stella Creasy MP Labour’s shadow minister for Competition and Consumer Affairs said;

“Wonga may be able to find twelve people to say they are happy customers, I can find 1200 who are not and who are now paying the price for borrowing from these legal loan sharks. They like to claim they are different from other payday lenders, but the truth is they are all as bad as each other. That isn’t my review, but the outcome of the Office of Fair Trading investigation which found the entire payday lending industry in Britain was out of control. That’s why they have written to 50 legal loan sharks including Wonga about their behaviour. If Wonga really want to be transparent about how they make a million pounds a week from lending to hard pressed Brits, they should own up to being warned by the OFT and spell out what they are doing to put that right, rather than filling our cinema screens with such fiction.”

“Families struggling with the cost of living crisis need protection from their propaganda. It’s bad enough that you can buy a Wonga babygrow at the football clubs they sponsor. Parents taking their children for a well deserved night out at the flicks don’t want their kids subjected to this toxic marketing – I hope at the very least those screens that do show this film give it an 18 rating to reflect the potentially harmful nature of this footage.”

“The real story here is Britain’s broken consumer credit market- The Government may be happy to go along with this fiction but we are not. Only Labour is committed to reforming this industry by introducing caps on the cost of credit to limit the debt these loans can cause and making consumer credit work for everyone.”

Notes

1. The Office of Fair Trading referred the entire payday lending market to the Competition Commission in June this year following a  review into compliance with its responsible lending guidance

-          You can view the report in full by visiting the OFT website

-          Half (48%) of payday loan users have taken out credit that it turned out they couldn’t afford to repay

-          A third (29%) of payday loan users have taken out credit that they knew they couldn’t repay and in the last 12 months of 2012, more than half (57%) of people with payday loans missed a payment and incurred charges because of missed of bounced repayments.

-          The Office of Fair Trading referred the market to the CC for investigation in June this year. The CC is now carrying out its own comprehensive investigation, to see if there are any features of this market(s) which prevent, restrict or distort competition and, if so, what action might be taken to remedy them. For more information visit the competition commission website.

2. The Financial Conduct Authority has published its proposals for consumer credit lenders in the FCA rulebook – you can find out more about the proposals in full by visiting the FCA website.

-          The consultation closes on the 3rd December 2013 and you can take part by reading the proposal document by visiting the website.

-          Martin Wheatley from the FCA has said the regulator is looking at a total cost cap but currently does not have the market data to assess where to place the cap level.

3. Wonga announced earlier this year that they are now making more than £1m a week in profit – a 36% increase on 2012. You can read a response from Stella Creasy MP by visiting the website.

4. The Sharkstoppers campaign pack contains campaign ideas for making local communities legal loanshark free zones – It can be downloaded from Stella Creasy’s website and has been circulated to campaigners across the country. You can download the pack by clicking here 

5. Stella Creasy MP has been campaigning for caps on the cost of credit since 2010 and now leads on the issue as part of Labour’s shadow Business, Skills and Innovation team. You can find more details on the Sharkstoppers campaign hereFor more information visit Stella Creasy MP’s website at www.workingforwalthamstow.org.uk or call Jon Chambers on 020 8521 1223

Government Lets Legal Loan Sharks Slip Through The Net Again says MP as FCA Dodges Credit Caps Question

shark1-290x290

Responding to the proposals outlined for consumer credit lenders in the Financial Conduct Authority’s rulebook, Stella Creasy MP again warned time was running out to tackle the problem legal loan sharks cause and called for Government to introduce a total cost cap on credit. Speaking about the proposals Stella said:

“Whilst I welcome the focus of the FCA on legal loan sharks and their research into capping, the lack of real action again today on the actual cost of credit itself will be a blow for many caught in a spiral of debt due to payday lenders. The FCA’s hands are being tied by a Government that consistently speaks out against what most other countries have done to tackle legal loan sharks by opposing capping what these companies can charge. With 80% of these loans for just putting food on the table, or a roof over their heads, we know people are borrowing for everyday essentials not luxuries. Price caps would make these loans more affordable and so less like to cause debt problems in themselves. The measures the FCA announced today may go some way to limiting some of the damage being done, but they won’t prevent them like capping would. The FCA today have said they don’t have the data from lenders to set a cap – and that’s why the Government must step in before April 2014 to make it a requirement for these companies to work with the FCA in setting a proportionate cap. That’s why Labour is committed to introducing a total cost cap- and why it’s wrong that the government keeps ruling it out.”

Commenting on the FCA proposals to limit rollovers Stella said:

“An OFT report into the industry has shown how only 11% of lenders assess the affordability of a loan the first time the loan is rolled over – with people using multiple lenders to pay off multiple loans, whilst a third of loans are repaid late or not repaid at all. Limiting rollovers within individual firms will do little to stop this payday tourism, as borrowers move from company to company taking out loans to cover existing ones.”

Commenting on plans to limit the ability of companies to use continuous payment authorities Stella said:

“It’s right that we reform how CPAs are used, but limiting the number of times they can be used doesn’t deal with the amount the firms are taking from bank accounts which is the real source of problems. Lord Freud says the Government is worried about companies exploiting universal credit payments to make sure they get their money – these proposals won’t prevent that, and if anything could make it more likely these firms will debit bank accounts early to ensure they get their fees. That ministers think the way in which money is taken is the problem- rather than the amount itself- shows how hopelessly out of touch they are on this issue.  Jo Swinson calls capping the ‘warm and fuzzy’ approach, failing to understand it’s the cost of credit itself which causes the problems in the first place to consumers.”

She continued to discuss the problems with the market:

“The case for change is overwhelming -legal loansharks are making profits of more than £1m a week as British consumers struggle with the rising cost of living. Report after report shows this industry is out of control – and the on-going investigation by the Competition Commission into the entire industry shows tinkering around the edges using rulebooks and guidance will do little to fundamentally overhaul this industry. For the past 3 years, the Office of Fair Trading, the Government and payday lenders themselves have all promised to take action on this industry following repeated warnings continually falling on deaf ears. Yet 3 years later, and every rule in the book still broken, legal loansharks continue to make 50% of their profits on loans rolled over or refinanced at least once and families are being forced to borrow for basics at rates of over 5,000%. Those who represent these lenders, such as the Consumer Finance Association, talk tough – claiming that the problem is just a few bad apples. Yet time and time again they refuse to debate with me the merits of making credit more affordable to prevent people getting into difficulty in the first place.”

Speaking about the Sharkstoppers’ campaign Stella said:

“The announcements today show just why Sharkstoppers’ campaigners fought to give the FCA the power to cap the cost of credit from April 2014 – so that the FCA could act to protect consumers and prevent debt problems. Yet without the support of Government to do this they are stuck, unable to really take on a litigious and aggressive industry which is protecting its profit margins. That’s why we are responding to the FCA’s consultation reaffirming our warning that without the FCA using its power to put a cap on the total cost of credit, legal loansharks will continue to be written blank cheques – making millions off hard-pressed Britons. Alongside a cap, the Centre for Responsible Credit and other organisations have called on the FCA to implement real-time credit checking across the industry – forcing companies to take responsibility for the lending they provide.

Only tough action by the FCA and the Government can stop the next 3 years being easy pickings for the legal loansharks – preventing people from getting into a damaging cycle of debt at the hands of these companies by giving them access to affordable credit, rather than just sitting by and trying to limit the damage they cause. British consumers deserve better – access to affordable and responsible credit, and action now can give them protections that others around the world enjoy. Lower levels of personal debt, lower levels of illegal lending and greater access to affordable credit. We can’t afford not to cap.”

Ends.

Notes

1. The FCA published its proposals for consumer credit lenders in the Financial Conduct Authority rulebook – you can find out more about the proposals in full by visiting the FCA website.

–          The consultation closes on the 3rd December 2013 and you can take part by reading the proposal document by visiting the website.

–          Martin Wheatley from the FCA has said the regulator is looking at a total cost cap but currently does not have the market data to assess where to place the cap level.

2. The Office of Fair Trading launched its review into compliance with its responsible lending guidance in February 2012.

–          You can view the report in full by visiting the OFT website

–          Half (48%) of payday loan users have taken out credit that it turned out they couldn’t afford to repay

–          A third (29%) of payday loan users have taken out credit that they knew they couldn’t repay and in the last 12 months of 2012, more than half (57%) of people with payday loans missed a payment and incurred charges because of missed of bounced repayments.

–          The Office of Fair Trading referred the market to the CC for investigation in June this year. The CC is now carrying out its own comprehensive investigation, to see if there are any features of this market(s) which prevent, restrict or distort competition and, if so, what action might be taken to remedy them. For more information visit the competition commission website.

3. The Sharkstoppers campaign pack contains campaign ideas for making local communities legal loanshark free zones – It can be downloaded from Stella Creasy’s website and has been circulated to campaigners across the country. You can download the pack by clicking here 

4. Stella Creasy MP has been campaigning for caps on the cost of credit since 2010. You can find more details on her campaign hereFor more information visit Stella Creasy MP’s website at www.workingforwalthamstow.org.uk or call Jon Chambers on 020 8521 1223.

MP welcomes Archbishops call to take on the legal loan sharks

shark1-290x290Responding to comments by the Archbishop of Canterbury about giving consumers alternatives to payday lenders who target vulnerable borrowers with excessive rates of interest and charges, Stella Creasy MP said;

“I’m pleased The Most Rev Justin Welby has reaffirmed the Church’s commitment to fighting the damage legal loansharks are doing to Britain and supporting the credit union movement to give people a fair alternative. Research out today from the University of Birmingham shows just how tough it is for people to save for a rainy day – with 1 in 5 needing to turn to borrowing to cover any unexpected costs – leaving British families vulnerable to payday lenders. With 18 legal loansharks on my high-street in Walthamstow alone, versus one credit union – we know all too well that our communities find themselves at the rough end of an unfair fight.

With millions of pounds at their fingertips to advertise and promote themselves, the payday lending companies that are taking over our high streets can’t be beaten on competition alone. The Archbishop has been an ardent campaigner and friend of the Sharkstoppers campaign in showing that there is no excuse for the Government not to act to bring an end to legal loansharking in Britain. Together with Lords from across all-sides of the House earlier this year, the Archbishop’s support in calling for the Financial Conduct Authority to have the power to cap the cost of credit was instrumental in forcing the Government to finally accept this measure in the Financial Services Bill. Yet we now know it could take two years for the FCA to consider using such a power – whilst legal loansharks continue to prey on our communities as finances remain tough for families.

That’s why we’re focused on fighting for the Government and Financial Conduct Authority to use their powers and cap the cost of credit and protect our consumers from the damage this toxic type of lending can do now. Osur communities and credit unions deserve a fair fight when it comes to giving consumers a fair deal – we’re also calling for a moratorium on payday lending advertising and promotion until after a Competition Commission review reports. There is no excuse for the Government not to act now to end legal loan sharking in Britain- our communities, our credit unions and our consumers deserve it.”

MP urges comedians to make legal loansharks No Laughing Matter as Birmingham research shows 1 in 5 have no rainy day cash

shark1-290x290For immediate release : Thursday 25 July 2013 01.00am 

Responding to figures released today by researchers at the University of Birmingham on levels of personal financial distress Stella Creasy MP said;

“When one in five Brits would have to borrow if they needed £200 for an emergency like a broken washing machine or car, it is no surprise so many are also considering taking out a payday loan in the next year. That’s why we’re redoubling our efforts to call on the Government, and the new Financial Conduct Authority to use their powers and cap the cost of credit and protect our consumers from the damage this toxic type of lending can do. As families continue to struggle with rising living costs, it is no surprise this research shows just how hard it is for people to save for a rainy day to cope with unexpected costs and so how vulnerable they are to such companies. That’s why there is no excuse for the Government not to act now to end legal loan sharking in Britain.”

As part of the sharkstoppers campaign, Stella Creasy revealed today comedians and celebrities are being urged to help the fight against legal loan sharking by pledging not to work with payday loan companies as either voiceover artists or spokespeople until a cap on the cost of credit is introduced. Speaking about this Stella said:

As the Competition Commission investigates the whole of the payday lending industry for malpractice, we are calling on everyone to join us creating a moratorium on payday loan advertising and promotion until after it finishes its work. As part of this we are asking comedians and celebrities to pledge not to promote these companies until there is reform- we’ve seen how these companies use such individuals to try to make themselves appear respectable and loveable  In standing up to these companies with us they can help us tell the truth about these firms and so make a real difference by saying the debts these companies cause are no laughing matter. ”

The call for action from comedians comes in the same week that several local councils have taken action to remove the promotion of these companies from public spaces. This includes Plymouth Council which has removed payday lending advertising from billboards and car parks as well as Edinburgh, Waltham Forest and Haringey Councils in London who have blocked payday loan websites from the council’s computers in libraries and public buildings. Throughout the rest of 2013 the Sharkstoppers campaigners will be targeting a range of individuals and organisations to help make Britain a legal loanshark free zone following the Government’s failure to cap the cost of credit.

Ends:

Notes

  •  The University of Birmingham’s research showed that whilst a quarter (24 per cent) of borrowing households owed less than £1,000 on unsecured credit, more than a quarter (28 per cent) owed in excess of £10,000 in 2008–9. People have very little capacity to meet unexpected expenses, even relatively small ones. About one in five of the population said they would have to borrow money if they needed £200 at short notice. Only two in five said they would be able to find £200 without cutting back on essentials or dipping into savings.
  • In data released by R3, there has been an increase in the number of adults who are worried about their debts with half of GB adults, equating to just over 20 million people, say that they are worried about their current level of debt, an increase from 42% in February this year. One in five adults say that they are very or extremely worried about their current level of debt, up from one in ten in early 2013. Of those adults worried about their current level of debt, 10% say that they are worried about debt from payday or other short-term, high interest loans. The highest concern about payday or other short-term, high interest loans is evident amongst 18 to 24 year olds. Of those within this generation who are worried about their debts, one in five (19%) say that they are worried about payday or other short-term loan debt, up from 8% in February and almost matching the highest levels of concern seen in this age group in July and October 2011.
  • For more information on the research by R3 contact Nick Cosgrove by email or on 020 7566 4215 or visit the R3 website at www.r3.org.uk
  • The Sharkstoppers campaign pack contains campaign ideas for making local communities legal loanshark free zones – offering materials to help lead action to kick out advertising from sports grounds, shopping centres and university campuses as well as asking celebrities to make sure they don’t sign up to promote payday lenders on our TV sets and promote debt advice and affordable credit within localities. It can be downloaded from Stella Creasy’s website and has been circulated to campaigners across the country. You can download the pack by clicking here .
  • Stella Creasy MP has been campaigning for caps on the cost of credit since 2010. You can find more details on her campaign hereFor more details on the #Sharkstoppers campaign to tackle legal loan sharking in the UK visit Stella Creasy MP’s website www.workingforwalthamstow.org.uk ; or call Jon Chambers on 020 8521 1223 or 07964 400 914.

Download: #Sharkstoppers 2013 Local Campaign Pack


This campaign pack is designed to give you lots of ideas as to how you could take this message out into our communities – whether through council groups, working with credit unions, supporting debt advice services, online or even through your local football club!

We hope this pack and the case studies it contains will give you some ideas for what you could do. If you do organise something in your area please do let us know so we can share it with others in this campaign too! Let’s make 2013/14 the year we all stand together to call for an end to legal loansharking in our communities and our country.

Download the pack here.