An insolvency expert has called for an end to expensive short term loans by capping the rates of interest and fees that lenders can charge.
Paul Moorhead, of South Yorkshire insolvency practice Moorhead Savage, spoke after Sheffield Central MP Paul Blomfield launched a new private members’ bill aimed at regulating pay-day loans.
The Office of Fair Trading has also referred the market for payday lending in the UK to the Competition Commission because of concerns about deep-rooted problems with the way competition works.
Mr Moorhead said: “These companies can dress themselves up with expensive TV advertising campaigns but by any other definition they are loan sharks that charge extortionate rates of interest and are preying on people who should not even be thinking about borrowing money.
“The simple truth is that if you borrow £100 for 28 days, you will pay back £135, which is more than a third on top of what you borrowed, and the reality for many is that the only way to repay the borrowing is to take out a second loan to repay the first – and so the cycle of debt begins to spiral out of control.”