Hackney Council back end legal loan sharking campaign
PUBLISHED: 13:03 31 January 2011 | UPDATED: 16:46 31 January 2011
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Hackney council have backed a nationwide campaign to cap the maximum interest rates ‘pay-day’ loan companies can charge
A nationwide campaign to end legal loan sharking has been backed by Hackney Council. A motion calling on the government to cap the maximum interest rate which loan companies can charge was adopted by the ruling Labour group and the Lib Dems opposition at last week’s full council meeting.
The suggestion will be put to the House of Commons as a private members bill on February 3.
Cllr Rathbone, who proposed the motion, said: “High and higher debt payments often have a devastating effect on our community.”
He added: “People are not just borrowing for a car or something else. They are borrowing to get by.”
After the meeting Cllr Rathbone, said: “Loan sharking is most definitely part of the profile of lenders in Hackney.
“We need to follow what is happening in Stevenage where they use their information services to pass on financial advice.
“I will be writing to Mayor Pipe to underline this.”
Currently short term loan companies are licensed by the Office of Fair Trading, who perform background checks on applicants for past conduct and criminal convictions, but leave the market to self-regulate interest rates.
A spokesperson for Wonga, a short term loan company with an advertised APR of more than 4,000 per cent, said: “It’s madness. APR was designed for loans of at least a year.
“The typical Wonga customer is employed and salaried. There are hundreds of checks before you get a loan and around 70 per cent of applications are turned down. If you compare our rates with unauthorised overdrafts, the APR on overdrafts can run into the millions.”
Debt advisors at the Hackney Citizens Advice Bureau said that around 25% of their clients were seeking advice about ‘pay-day’ loans and the numbers had been rising since the Hackney Credit Union closed down in July last year.
Gren Bingham is vice president of the London Community Credit Union, who last week opened a branch on the former site of the Hackney Credit Union.
He said: “In my opinion, the fact that people are saying that these are only short term loans and that APR doesn’t matter is wrong. Of course it matters; APR is the interest rate you are paying.”
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