A pay-day loan cap has been criticised for not going far enough – after it was revealed more than 3,000 people in Doncaster have had pay-day loan problems in the last year.
New rules on pay-day loans have come in to effect this month, capping rates of interest at 0.8 per cent per day on the amount borrowed.
This should have come as good news to the 3,233 people who sought help from Doncaster and Thorne Citizens Advice for pay-day loans in the last year – a fifth of whom had taken out more than one loan.
However, Caroline Flint, shadow energy secretary and Labour MP for Don Valley, says the cap will not result in a big enough change to the way that pay-day lenders operate.
She said: “The new cap does not go far enough.
“Even the new affordability checks will still enable 93 per cent of those currently given these loans to get them again in the future.”
Many money shop outlets have sprung up in Doncaster over the last few years, with more than 10 based in the town centre alone.
Karen Bothamley, chief officer at the Citizens Advice Bureau, Doncaster, said she agreed tighter regulations for pay-day lenders need to be brought in by the Government.
She said: “This cap allows 0.8 per cent interest every day, which means the cost of a £100 loan increases by £24 in just a month.
“The total repayments are capped at 100 per cent of the original loan after a period of 90 days.
“However, the new rules also leave out set-up costs and default fees from the total bill paid by the borrower, which are added to the interest.”