Creasy seeks cross-party support for payday loans cap

Published by Jon Land for 24dash.com in Bill Payments and also in Central Government, Housing

Labour's Stella Creasy is today rallying the support of fellow MPs as her amendment to the financial services bill - calling for a cap on the total costs that can be charged for "payday loans" - goes to a House of Commons vote.

The Walthamstow MP has led a high-profile campaign against companies such as Wonga and The Money Shop, which she brands "legal loan sharks" for the high rates of interest they charge.

Ahead of the Commons vote, Ms Creasy released the findings of a ComRes poll which showed strong support for stricter regulation of high-cost loans, which can carry interest charges of up to 16,000% APR.

The survey found that 65% of respondents agreed that there should be a cap on the total costs that can be charged for credit.

Despite public support, Ms Creasy cannot rely on cross-party backing for her amendment. A ComRes survey of MPs found that while the vast majority of Labour MPs (90%) favoured a cap, only 46% of Tory MPs and 51% of Lib Dems backed the move.

She says a cost cap, rather than a cap on interest rates, is the most effective way of reining in payday loan companies.

During a debate on payday loans last month, Ms Creasy told the House of Commons that Britain was a nation where one in six were "zombie debtors" only able to service the interest on their debts and not reduce them, while a third of people had no savings.

"High cost credit companies have very high fixed costs so they make their money by repeat lending. This means their entire business strategy is geared towards repeat borrowing and the rolling over of loans, that so many people here are so concerned about," she said.

"I believe that we do need total cost caps on credit charges so that consumers have an explicit amount beyond which the cost of any loan would never go, interests rates, admin charges and late repayment fees included."

Ms Creasy said the creation of the Financial Conduct Authority (FCA), as part of the Government's planned restructure of the UK's financial regulatory framework, presented an opportunity to "take action as quickly as possible and prevent the problems that we've already seen in our communities from these loans becoming worse".

Ms Creasy said further action would "win the gratitude of the fans of EastEnders watching these problems unfolding on their screens".

Her numerous Tweets on payday loans carry a 'savebianca' hashtag, a reference to the soap's current payday loan story line.

Ms Creasy has also urged greater investment into financial education and advocacy services to help consumers negotiate with creditors, plus the expansion of alternative sources of affordable credit through credit unions and social finance.