Both Labour and Conservative MPs have come to the same conclusion regarding payday loans: there is a need to set limits on the cost of this type of financing. Stella Creasy, who is a Labour MP, put forward a proposal that would place restrictions on the amount doorstep, hire purchase, and payday financers can charge for these types of loans and wanted it to be put into action as quickly as feasible.
Her suggestion was quickly countered by a Conservative MP, Robin Walker, who sought additional time for it to be studied by regulators. This amendment ended up being voted on and approved (271 to 156) in the House of Commons after a few hours of debate.
The present statistics on this matter reveal that these types of loans are being provided to the poorest people in society, who often earn less than £11,000. The interest rate on these loans often exceeds 4,000%. The Walthamstow MP Stella Creasy, who created the initial proposal, stated that a voter in her district was being hounded for £1,600 despite the fact they only borrowed £800 initially, and were just 40 days late on their payments.
Even the Consumer affairs minister Ed Davey agreed that something needs to be done, and was quoted as saying ‘This is a consequence of the need to protect those on lower incomes but there is a debate on how we do this. It would be rash and negligent to rush into these proposals without looking at the evidence. However, we are in listening mode.’
The Conservative MP Justin Tomlinson, who is in agreement with Creasy and helped her get the debate started on the floor, stated ‘There is true cross-party support on this. If you borrow ‘x’ there should be a limit on what you pay back. I support the principle, but it is essential we make things better and we should not rush in.’
Unfortunately, it does not look like any action on this proposal is going to happen any time soon and help people who are already using these loans. A previous government consultation on the matter closed down last month. The Department for Business, Innovation and Skills latter chimed in and stated that it could take anywhere from “a few months to a year” before the results of the consultation are announced.
The Conservative MP Justin Tomlinson later thanked MoneySavingExpert.com (MSE) for their input into the matter and stated that they were sponsoring the All Party Parliamentary Group (APPG) on Financial Education, which wants mandatory money lessons to be introduced at school.
Whatever the outcome of the proposal and studies, it is certain we have not heard the last of this matter. With it so negatively affecting a portion of the population that can least afford it, surely some type of regulation will be put in place sooner or later.