Stella Creasy has today tabled an amendment to the Financial Services Bill which if successful would give the Financial Conduct Authority the power to cap the amount payday lenders can charge their customers.
Rather than capping interest rates the MP for Walthamstow – previously best known for being shooed away from a lift in the House of Commons by a Tory minister who assumed the young blonde was a lost tourist – wants a cap on the total amount charged for a payday loan after interest and any other charges such as arrangement fees have been calculated.
“This would give regulators powers to tackle the problems caused by legal loan sharking. The Financial Services Bill covers many issues including reforming the way banks are regulated and the creation of a new Financial Conduct Authority. Crucially the new FCA will also oversee consumer credit – and have the power to act against companies who offer toxic financial products” Creasy said in a statement.
The actual amendment from Creasy and which has received backing from other Labour MP’s reads:
“The FCA may make rules or apply a sanction to authorised persons who offer credit on terms the FCA judge to cause consumer detriment. This may include rules that determine a maximum total cost for consumers of a product and determine the maximum duration of a supply of a product or service to an individual consumer.”
If successful the amendment grants the FCA the power to apply a cap, presumably if it found a company was using shady tactics to attract customers. At the moment any wrong doing such as mis-selling by a payday lender risks their consumer credit licence being revoked but this can take upwards of a year as was the case with Yes Loans.
Imposing a fine on the lending companies doesn’t have much effect either as many are making millions of pounds profit a year.
Stella Creasy would like to ban payday loans but if she can’t have that wish she al least hopes eventually to have a total cap on all payday loans such as those imposed on lenders in the USA and other parts of the EU.
Those apposed to capping claim high street lenders such as The Money Shop and Cash Converters would have to stop offering payday loans to walk in consumers if a cap of less than £30 per £100 was imposed due to the cost of rent, rates, staff wages etc. and without genuine lenders available people would again start turning to illegal loans sharks.
As Stella Creasy is fond of calling the payday loan industry nothing but ‘legal loan sharking’ perhaps the MP’s voting on her amendment today will have to ask themselves if it is better for their constituents to be borrowing money from a ‘legal loan shark’ or an illegal one?