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MPs welcome crackdown on payday lenders
11:00am Thursday 7th March 2013 in News
MPs in the district have welcomed news that the UK’s 50 biggest payday lenders have been given 12 weeks to change their ways or risk being put out of action, after the trading watchdog uncovered evidence of “widespread irresponsible lending”.
But one MP urged the Office of Fair Trading (OFT), which yesterday proposed to refer the payday market to the Competition Commission after finding “deep-rooted problems” in how lenders compete with each other, to proceed with caution.
The OFT found evidence that the 50 lenders, which account for 90 per cent of the market, were failing to comply with the standards expected.
They are in danger of losing their licences, which they need in order to trade, if they fail to clean up their act.
The Telegraph & Argus has previously reported how Bradford and Aire-dale’s Citizens’ Advice Bureau saw 32,000 people with a combined debt of £16 million pass through its doors in 2011. Sixty-eight volunteers helped deal with those clients between April 2011 and March last year, but the branch estimates it needs up to 200 volunteers to tackle all the queries it receives.
Speaking after the latest news, Shipley MP, Philip Davies, (Con), said: “I am sure everyone supports the OFT in their aim to have an industry which operates responsibly. However, we must tread carefully.
“Removing legal lenders through well-meaning legislation and regulation will not reduce the demand for their services, it will just push people to illegal loan sharks whose way of operating is often utterly unacceptable and much worse for their customers.”
The OFT’s report is the culmination of a wide-ranging probe into the £2 billion payday sector. The regulator’s review said irresponsible lending was found across the industry.
It said despite payday loans being described as one-off, short-term loans costing an average of £25 per £100 for 30 days, up to half of payday lenders’ revenue comes from loans which last longer and cost more because they are rolled over or refinanced.
The OFT said a full investigation by the Competition Commission is needed to potentially impose “lasting solutions” to serve customers better.
Bradford West MP George Galloway (Respect) said: “These companies are exploiting the poorest members of society with their usurious rates of interest, sometimes at thousands of per cent. I’m pleased that something is being done, but it’s too little too late.”
David Ward, MP for Bradford East, (Lib Dem) said: “Payday loans make up a frightening level of the debt in Bradford and I very much welcome the Government’s progress in tackling the cruel culture of targeting vulnerable people.”