Liberal Democrat peer John Sharkey today welcomed the Government’s adoption of his proposals to cap the cost of payday loans.
The Chancellor has announced there will be controls on charges on the loans, including arrangement and penalty fees, as well as on interest rates.
The move comes just a day before the House of Lords is due to debate Lord Sharkey’s amendment to the Financial Services (Banking Reform) Bill which would introduce such measures.
Lord Sharkey’s amendment would allow a maximum loan of £300, set a cap on charges of a maximum 10% of the loan value and prevent people from having two or more loans at the same time.
It would also allow a loan to run for no more than 31 days, with a 60-day extension, and require a 24-hour gap between loans.
Although the Government has not adopted the specifics of the amendment – the cap will be decided by the regulator, the Financial Conduct Authority – Lord Sharkey said he was “delighted” the Chancellor had accepted the principle.
He said: “Uncapped payday loans get people into real trouble so I am delighted George Osborne has acted in response to my amendment.
“For far too long unscrupulous payday loan companies have been allowed to prey on some of the most vulnerable people in our society with impunity.
“Far from leading to a reduction in access to credit, as the payday lenders are claiming this morning, evidence from the USA has shown that the volume of money lent to people actually increased after a regulatory system was put in place.
“People need protection from the worst excesses of the payday loan companies, and I am glad that the Treasury has seen the light.”
Published and promoted by Tim Gordon on behalf of the Liberal Democrats, both at LDHQ, 8-10 Great George Street, London, SW1P 3AE.