Tag Archives: Pay day loans

Cap on Credit Just the Start of the Battle to Fight Britain’s Personal Debt Crisis Warns MP

As the Financial Conduct Authority’s cap on high cost credit comes into force against a backdrop of ever increasing personal debt Labour’s Shadow Competition and Consumer Affairs Minister, Stella Creasy MP, warns:

“Almost a third of us say we had to borrow to get through the festive period, and 1 in 10 of us plan to get a payday loan to cover these costs. These are families already struggling with making ends meet, facing difficult bills for food, housing, travel and utilities. Given personal debt has doubled in Britain in the last year, challenging the practices in the consumer credit industry which makes these debts unsustainable is crucial to helping Brits who will start the year in the red not the black.

“Yet the cap on credit coming into force today is just £1 lower than current rates legal loan sharks charge, and still encourages companies to push people into debt by allowing them to profit from default charges.  Little wonder despite intense scrutiny many of these firms can still make nearly three quarters of a million pounds a week from British customers. And it’s not just the payday loan firms using the financial pressure Britons face to make money, with evidence credit card companies and banks are also profiting too.

“We are spending £163 million in interest alone on our personal loans– the equivalent of over 5,000 qualified nurses for a year. Payday lending is a symptom of these problems, not their only cause. That is why the next Labour government is determined to reform our consumer credit industry- abolishing fee charging debt management plans, providing more affordable credit through credit unions and regulating the advertising for payday lenders and their presence of on our high streets.

“With the Money Advice Service warning that nine million of us are in danger of going under with Britain’s personal debt habit we cannot afford to ignore these practices. The FCA’s New Year’s Resolutions must be to get to grips with problem debt now holding back our country.”



1.     R3, the association of business recovery professionals, report in their December 2014 Debt Snapshot that 57% of all people in work struggle to make it to payday while 27% of us are planning to get through Christmas by borrowing.

2.     As a consequence 8% of British adults say they are likely to take out a payday loan in the next six months.

3.     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

4.     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

5.     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. This is only in cases where people pay back their loans on time. Charges can be as much as double the initial loan if people fall behind.

6.     Having reviewed the potential effect of the cap on competition in the industry the Competition and Markets Authority found: “Our view is that scope for substantive price (and non-price) competition within the constraints of the proposed price cap would remain” p.98 https://assets.digital.cabinet-office.gov.uk/media/5435a640ed915d1336000005/Payday_lending_PDR_and_appendices.pdf

Labour Slams Government Inaction as Regulator Highlights Dangers of Logbook Loans

Responding to customer research published today by the Financial Conduct Authority Stella Creasy MP, Shadow Minister for Competition and Consumer Affairs said:

“Less than a month ago, Labour proposed giving borrowers in Britain protection from Log book loans by outlawing the Bill of Sale Agreements which these companies use to take advantage of people in need of credit. We wanted to protect consumers against this type of legal loan sharking- but yet again the Government ignored our warnings and voted down this proposal.

“Time and again this Government has been too slow in recognising and reacting to dangerous practices in the consumer credit market. This research makes a damning case to show there’s more than one toxic type of company out there causing serious damage to the finances of families- those struggling with these loans will rightly be asking why the Government continues to fail to get a grip of these problems and not to listen to either us, the Citizens Advice Bureau or the customers of these companies themselves who are being exploited.”



1.       The Financial Conduct Authority published research today, some of the main findings were that-


  • often have few alternative sources of large amounts of credit
  • do little or no shopping around
  • are often unclear about important loan aspects, e.g. the total cost of the loan,  additional charges and the fact that ownership of the vehicle transfers to the lender
  • say they are often subject to aggressive and threatening behaviour if they experience repayment difficulties
  • many experienced payment difficulties at some point, suggesting firms may not be carrying out adequate affordability checks.


  • have high APRs, typically 400% or more, plus additional fees and charges
  • appear to rarely carry out affordibility checks
  • online lenders mainly consider the value of the car when granting a loan rather than the individual’s ability to pay


2.       At report stage of the Consumer Rights Bill Labour proposed a New Clause to limit the use of Bill of Sale to underwrite Logbook loans, provide modern consumer credit protection and protect third parties who buy cars in good faith. On 13 May 2014the Government MPs voted against the changes.


3.       Since 1st April the Financial Conduct Authority took over regulation of the Consumer Credit Market including Log Book Loans


4.   A logbook loan is a form of credit where a legal document called a Bill of Sale is used to  secure a loan on a debtor’s vehicle. The lender retains legal ownership of the car for the life of the loan and the structure of the loan means that the lender can repossess the debtor’s vehicle without a court order. A lender is also able to take possession of the vehicle from a person who purchases the vehicle from the original debtor if there is an outstanding loan against it.

#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.


Government listens to Sharkstoppers campaign and caps the cost of payday loans


moneyshop1Responding to the Government’s announcement on capping the cost of payday loans Stella Creasy MP, Labour’s Shadow Business Minister, said:

“Just two months ago this Government criticised Ed Miliband for wanting to reform broken markets, and now today we see them following Labour’s lead on the need to act against legal loan-sharking.

“Whether in Parliament or out on Britain’s streets in the Sharkstoppers campaign, we have been making the case that capping is a tried and tested method used in many other countries to tackle the problems caused by payday lenders. For too long David Cameron has ignored our pleas to act and it is cash strapped consumers caught in the spiral of debt these companies generate who have paid a heavy price as a result.

“Labour is committed to caps on the total cost of credit and we know there’s still more to do to address the damage this toxic industry has done to the lives of millions. We want a levy on these companies to expand the funds available to credit unions so they can serve more people,  powers for councils to limit the growth of these companies on our high streets and a ban on advertising to children of these products.

“That the Government is today admitting it got it wrong in opposing these measures and is still playing catch up on how to combat these problems shows it is Labour who have the ideas and determination to tackle Britain’s cost of living crisis.”

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,
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,”