Call to end legal loan sharking – and interest rates of over 2500%

A coalition of citizens groups, MPs and campaigners have called on the government to end legal loan sharking.

A coalition of citizens groups, MPs and campaigners have called on the government to end legal loan sharking. At present, there is no limit on the price lenders can charge for credit – resulting in some companies charging £82 per £100 loaned and annual interest rate charges of 2,500 per cent – trapping vulnerable customers into cycles of debt and poverty from which they cannot escape.

The campaign coalition is calling on the government to ban excessive prices for credit and provide alternative sources through community development financial institutions, credit unions and a post bank. Currently, £16,000 of excess profit is made every hour in the credit lending sector, according to the Office of Fair Trading.

Gavin Hayes, general secretary of Compass (who are co-ordinating the campaign), said:

“Door to door lenders are now charging £83 for every £100 borrowed, whilst some online pay day lenders charge a whopping 3,000 per cent APR.

“This is legal loan sharking, a national scandal which must come to an end. Now is the time for caps on all consumer credit and real affordable alternatives through a post bank”

Lisa Nandy, Labour MP for Wigan, added:

“The government has committed to curb excessive rates on store and credit cards but not high cost credit. This means the 3 million people who use high cost credit will have no defence against their excessive profiteering.

“We need to ask, is the government looking out for the middle classes and ignoring the needs of the poorest borrowers?”

• To sign the petition, go to www.endlegalloansharks.org.uk

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15 Responses to “Call to end legal loan sharking – and interest rates of over 2500%”

  1. David Hickey

    RT @leftfootfwd: Call to end legal loan sharking – and interest rates of over 2500% http://bit.ly/drj3Nk

  2. Shamik Das

    RT @leftfootfwd: Call to end legal loan sharking – and interest rates of over 2500%: http://bit.ly/drj3Nk ft. @compassoffice & @lisanandy

  3. Ben Farress

    RT @leftfootfwd: Call to end legal loan sharking – and interest rates of over 2500% http://bit.ly/drj3Nk

  4. Richard Johnson

    RT @leftfootfwd: Call to end legal loan sharking – and interest rates of over 2500% http://bit.ly/drj3Nk

  5. Duncan Stott

    Call to encourage illegal loan sharks? http://bit.ly/drj3Nk

  6. James H

    I’m not condoning insanely high interest rates for loans to people who can’t afford it, but the APR figure can be grossly misleading. If the loan is short-term, say 1 week long, then expressing the interest rate as if it were to be applied over an entire year (i.e. in this case, (1+r/100)^52 where r is the weekly rate) is grossly misleading.

    It’s explained clearly in the FAQs for one of the national television advertisers http://www.wonga.com.

    They seem considerably more responsible open and honest than your average loan shark, doorstepping the poor and vulnerable.

    James.

  7. Gina Byrne

    RT @leftfootfwd: Call to end legal loan sharking – and interest rates of over 2500% http://bit.ly/drj3Nk

  8. Mary Goudie

    RT @leftfootfwd: Call to end legal loan sharking – and interest rates of over 2500% http://bit.ly/drj3Nk

  9. LadyRoisin

    RT @leftfootfwd: Call to end legal loan sharking – and interest rates of over 2500% http://bit.ly/drj3Nk

  10. Duncan Stott

    I think there is a reasonable case to be made for tightening the regulations on how “legal loan sharks” (or perhaps less pejoratively, payday lenders) can sell and market their product. A ban on door-to-door cold-calling seems sensible, for instance.

    But I am sceptical about how capping the interest rates that can be charged will be in the best interests of the most vulnerable. If lenders were unable to charge these rates, the concern would be that they simply wouldn’t lend to those who need it at all, and would force those in need of a short-term loan into the hands of criminals.

  11. Adam

    People charging those interest rates ARE criminals.

    James H – that’s complete nonsense. The APR is useful precisely because it allows annual comparisons. Otherwise people can get away with ripping off poor and vulnerable peoplem just as in your example.

  12. James H

    Adam, no it’s not complete nonsense. Perhaps you didn’t understand it.

    I’m not disputing that people need a standard comparison. My point and example suggest that APR is not be the correct one.

    Go to wonga.com, read their FAQs and tell me if you think they are trying to rip off poor and vulnerable people or if it is a genuine attempt to provide short-term loans to people who wouldn’t otherwise get one.

  13. Shamik Das

    Q frm @stellacreasy on @compassoffice campaign to end legal loan sharking; see here for more: http://bit.ly/drj3Nk

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