A new Bill is being put through Parliament to help shield consumers from unscrupulous payday lenders, after Citizens Advice recently revealed that many firms have been flaunting industry guidelines by harassing customers and lending irresponsibly.
Many payday lenders were found to be seriously neglecting their duties by failing to conform to a range of criteria, including checking if people can afford to pay back loans, freezing interest rates and charges for those struggling to repay, and not pressuring people into extending loans.
Course of action
The report led to calls for the government and industry to introduce tougher sanctions and guidelines for companies operating within the payday loans sphere, culminating in Paul Blomfield MP introducing a Private Members Bill that will have its First Reading this week.
In the Bill, Mr Bloomfield proposes strict regulation of payday lenders to ensure that the issues highlighted in the Citizens Advice report are eradicated and consumers are approached and treated fairly.
“Payday money lenders are making millions from extortionate loans to some of the most vulnerable across the country,” he explained.
“In hard times, it’s no wonder that people who are struggling will turn to them for help. But the massive interest rates, rip-off charges and misleading advertising of payday lenders are often just pushing people further into debt.”
Sticking to the rules
The legislation, entitled the High Cost Credit Bill, will set out a number of proposals to safeguard consumers, including new controls on the advertising of high cost credit products, to ensure clearer information is provided to borrowers on the cost of loans.
It will also see the introduction of lending limits and the capping of excessive charges, to ensure that loans are affordable to consumers.
“It will also protect borrowers having problems with repayment by requiring lenders to refer them to free independent debt advice, freeze charges and ensure that proper repayment plans are put in place,” the MP revealed.
The Bill, which is set to be fully debated at its Second Reading in July, has received the backing of Citizens Advice chief executive Gillian Guy, who said something urgently needs to be done to prevent payday loans customers from “drowning in debt” as interest rates and charges exacerbate their problems.
“Celebrity endorsement, cartoon characters and football sponsorship deals lucratively advertise payday loans as a short-term fix, masking the long-term hardship that often follows,” she explained.
“This Private Members Bill is a step towards protecting people from predatory practices and overcoming the problems payday lenders failed to address by breaking their promises to customers.”