Debt and insolvency among Britain’s low-income households will only get worse, the Labour backbencher behind a legislative campaign to reform consumer credit warned this week.
althamstow MP Stella Creasy told a Westminster Hall debate that too many people are denied access to banks and forced to rely on hire purchase and payday loan companies, driving them further into poverty.
Ms Creasy’s Consumer Credit (Regulation and Advice) Bill was endorsed by MPs in Parliament last week, and will be fully debated in February.
The bill would introduce an upper limit on the interest rate that can be charged on loans, including late payment and non-payment fees.
The Association of Business Recovery Professionals reported earlier this year that four in ten adults are worried about their level of debt. Ms Creasy said: “There is every indication that these problems will only get worse, especially for those who can least afford indebtedness.
“The Government’s deficit reduction programme will put millions of people who are on low incomes under severe financial pressure, as they face reduced public services, a greater threat of unemployment and public sector pay freezes.”
Ms Creasy welcomed ministers’ commitment to consider capping the interest on credit cards and store cards in a forthcoming review, but added that this did not go far enough.
“Six lenders account for 90 per cent of the home credit market, so there is little competition to drive down interest rates”, she said, calling on the Government to consider capping interest on all types of loans.
Universities minister David Willetts said ministers would be happy to consider any evidence as part of the review, but did not commit to looking at payday and home loans.
Lisa Nandy, Labour MP for Wigan and a supporter of Ms Creasy’s bill, said last week: “With some firms charging over 400 per cent in interest for a loan, it’s high time the Government stepped in to help ordinary people from Wigan and places like it across the UK from these high street loan sharks.”
Watchdog Consumer Focus called for limits to the frequency and level of interest rate rises earlier this year.
