Monday, 25 November 2013
Payday loan companies capped now lets scrap them entirely !
The government is to introduce a new law to cap the cost of payday loans. The level of the cap, which has not yet been announced, will be decided by the new regulator, the Financial Conduct Authority (FCA). The Treasury says there is "growing evidence" in support of the move, including the effects of a cap already in place in Australia. The cap will be included in the Banking Reform Bill, which is already going through Parliament. Speaking to the BBC, the chancellor, George Osborne, said there would be controls on charges, including arrangement and penalty fees, as well as on interest rates. "It will not just be an interest rate cap," he told the Today programme. "You've got to cap the overall cost of credit." He denied the government had a made a u-turn on the issue, and said he was not pre-judging the outcome of a Competition Commission inquiry into payday lending. "These things can go along in parallel," he said. Some payday lenders have been criticised for charging more than 5,000% annual interest - though the lenders say these loans are meant to be short-term so the annual rate can make charges appear worse than they are. 'Duty on regulator' Australia has an interest rate limit of 4% per month, after a maximum up-front fee of 20%. The FCA has already been given the power to cap the costs of payday loans. It has also proposed a series of measures to clamp down on the industry, including limiting loan roll-overs to just two. Labour leader Ed Miliband has already said his party would cap the cost of payday loans. This is something to be welcomed of course but in my opinion does not go nearly far enough. Payday loan companies are the scurge of the high street in times of austerity pray on the most vunrable. Its time to outlaw them entirely and to scrap them for good.