Interest Rate Cap Works Fine for Credit Unions

Published by Graham Tomlin for Credit Union Solutions Ltd in Communities and also in Central Government, Education, Health, Housing, Local Government

News that a survey by Compass indicates a majority (70%) of those polled want the Government to ban excessive interest rates on store cards, Credit Cards, Pay Day loans and pawnbrokers comes hot on the heels of the news that over a £1Billion has been lent out in Pay Day Loans.

High interest rate Pay Day lenders have been banned from most if not all of the states in the USA and Governments in Europe also have laws against usury.

Only here in the UK are usurers allowed to ply their trade unhindered by Government action.

Credit unions have, since legislation for them was enacted in 1979, worked within a framework of capped interest rates currently 26.8apr. Government has never had a problem enforcing a rate cap on credit unions so what is the problem on capping Pay Day lenders, credit card and bank overdraft fees?

How is it that Government cannot see that 2,600% interest on a pay day loan is extortionate? Do they not understand that even mathematicians and accountants cannot work out the interest on a credit card bill so what chance do we have as customers?

It is not just about interest rates it is about enabling the public to understand what they are being charged and the conditions around those charges.

For a Government trying hard to make us swallow some unpalatable cuts this is one of the most popular ways to redress the balance.

Is there any chance that George Osborne could use the same pen that he used to remove RPI and replaced it with CPI, to cap interest rates? I live, as they say, in hope rather than expectation.

As a credit union activist I can vouch for the popularity of fixed interest rates so George needs to be wary of a future opposition party hauling interest rate caps up their manifesto flag pole because many millions will definitely salute it.