Parliament will not give up until statutory regulation is introduced to help tackle irresponsible payday lenders, a Sheffield MP suggested today.
Kicking off the second reading of his Private Member’s Bill, Paul Blomfield said there was a growing cross-party consensus to tighten up the regulatory framework surrounding loans that affect the most vulnerable people in society.
The Sheffield Central MP told the Commons: “Firstly, wherever we get to with this Bill, a desire from members of this House to see statutory regulation of payday lending will not go away. Secondly, there’s a growing consensus not only across the parties but well beyond this place of what the key components of that regulation should be.”
The Star is backing Mr Blomfield’s High Cost Credit Bill to regulate pay-day lenders which typically charge high interest rates on what are supposed to be short term loans.
The bill is to regulate the market with tighter controls on advertising, would make charges clearer and cap excessive charges.
Mr Blomfield’s comments came as new figures revealed that more than 30,000 people with payday loans had sought debt advice from the charity StepChange in the first six months of 2013 - almost as many as in the whole of 2012.
He insisted, however, there was no intention to ban payday lenders outright.
He said: “We all know that payday money lenders are making millions from some of the most vulnerable, targeting the poor and making them poorer, pushing them into unaffordable and spiralling debt with exhorbitant charges.
“But - and I emphasise - it is not the intention of this Bill to close down payday lenders because, sadly, for many people there are few alternatives.”
Mr Blomfield said he had drawn on the advice of the Citizens Advice Bureau, the debt charity Stepchange, the Centre for Responsible Credit, consumer campaigning magazine Which? as well as local debt advisers from Sheffield in preparation for the Bill.
He added that the Bill “does not seek to tie its hand with overprescriptive detail, but rather aims to provide a positive direction of travel to the Financial Conduct Authority on the key issues, and I hope that that direction of travel is also consistent with Government thinking”.
Labour MP colleague, Craig McClymont said payday loans were an example of “capitalism of the worst kind”.
The Bill would also force loan companies to refer those with problems making repayments for free debt advice and freeze any charges against their account.
Jo Swinson, speaking on behalf of the Government, said the sector needed reform but made clear there was a place for payday loans.
She told the Commons: “There is a place for high-cost, short-term lending. There are some circumstances for emergency cash or to manage a short-term cash flow problem where they can be useful.
“But they are not right for many consumers and indeed many consumers end up being lured into taking out these loans when they can’t afford to repay them, when they shouldn’t have been given them in the first place.
“Too many people are not getting a fair deal and that’s why action is needed and indeed that’s why action is being taken.”
The parliamentary under-secretary for the Business Department said cracking down on bad practice among payday lenders was a “high priority” for the Government as well as a personal priority.
“But what we also need to recognise is that the solutions are not easy and are not simple; this is a complex market. There is a wide range of factors that drive consumer behaviour around financial management and debt,” she said.
Ms Swinson said the Government’s non-statutory approach would lead to “better, faster and more responsive results than legislation”.
Penny Mordaunt, Tory MP for Portsmouth North, said she was sympathetic to the Bill. Turning to Ms Swinson, she said she wanted “to respond to the accusation that some of my colleagues, and you yourself, are seeking to talk out this Bill. Although the members for Shipley and Christchurch are a dynamic duo, I point out that as someone who is sympathetic to this Bill, that they couldn’t possibly do a better job today than the Labour front bench themselves”.
Ms Mordaunt was referring to her Conservative colleagues Philip Davies and Christopher Chope who, unlike their colleagues, are not sympathetic to the Bill.
Ms Swinson joked the pair were the “Batman and Robin of Fridays in the House”.