Rachel has signed up to the Compass campaign calling for an end to legal loan sharks. The poorest people in our society pay outrageous rates of interest to lenders who operate within the law.
The campaign calls for proper regulation of these companies, who can lawfully charge interest rates of up to 2500%. Around 3 million people use doorstep lenders – who often charge around £83 per £100 borrowed. The campaign is calling for better regulation of the loan industry:
Government initiatives to date have not worked: The Growth Fund, set up to increase availability of affordable credit to the poorest households, is nearly £100m. In contrast, the OFT estimates that the high cost credit sector is worth £35bn annually. The only way to stamp out legal loan sharking is by establishing a lending rate cap to cover all forms of consumer credit in order to reduce prices in areas of the market that are not price competitive. Importantly, a cap needs to be accompanied by increasing access to more affordable, responsible sources of credit. The government should therefore further develop the idea of a ‘Peoples’ Bank’ using the Post Office network; ensure greater support for local credit unions, CDFIs, co-operatives and mutuals. Furthermore, all banks should be obliged to provide a universal banking service.
Rachel supports capping the maximum rate of interest that can be charged by lenders, in order to protect people who often have nowhere else to turn for money:
‘These lenders prey on communities like Leeds West, where earnings are below average and where there are few options for getting money for basic needs. People in the poorest areas already pay about £1,000 more for basic services, goods and appliances than people who have access to more money – this is a scandal. The government must take steps to make sure that everyone has access to a bank account and interest rates are capped to protect vulnerable people from spiralling into unnecessary debt.’
It has been estimated that £18m of debt repayments are being made in west Leeds each year – often at a high interest rate. If you are struggling to get short term finance to cover costs, the best places to visit are the Leeds or Bramley Credit Unions.
Chris Smyth, Chief Executive of Leeds City Credit Union, told Rachel: “Excessive interest rates charged by some legal lenders blight communities and destroy lives. As a credit union we are constantly coming across people who have been at the mercy of lenders who charge excessive rates of interest. In many cases, as a credit union, we are able to help people escape excessive debt by providing affordable credit. Recent research by Salford University, carried out for Leeds City Council, has shown that for every pound Leeds City Credit Union spends in providing affordable credit provides a benefit to local communities of £8, compared to the money taken out of communities by door step lenders. This multiple would be even higher if compared to some of the very highest rates of ‘legal’ lending that we comes across”
You can contact Leeds City Credit Union by phone on 0113 214 5252, or visit Bramley Credit Union at the Bramley Community Centre on Waterloo Lane.
Take action to support the campaign now! Visit the campaign website http://www.endlegalloansharks.org.uk/ for more information about what you can do.