Parliament is voting on an amendment to legislation which will mean that the legal money lenders that prey on vulnerable households struggling with debts will no longer be able to get away with irresponsible credit practices.
Ministers from both parties across several departments have agreed that more regulation is required in the high-interest credit sector of the market as the demand for pay day loans increases in line with the economy’s continued depression.
Credit remains difficult to obtain for many more households due to the tighter lending criteria that banks are operating, meaning that a much higher number are being forced to explore alternative options such as payday loans as well as doorstep credit. Moneysupermarket have said that their latest figures revealed that payday loan applications have gone up by 58% in one month alone.
The move to tighten up loan sharks who charge exorbitant rates of interest and take advantage of customers’ naivety over credit rules, has garnered support from main stream lenders. Nationwide Building Society is one of those supporting the new legislation saying that ‘greater scrutiny’ was required to protect customers who were ‘at risk from a lack of transparency.’
The changes to the Finance Bill will provide ministers with the opportunity to reduce loan sharking practices in a variety of ways and ensure that those high-risk lending firms that remain in business operate ethical lending practices and customers are fully aware of repayments, interest and charges. To date ministers have largely ignored the specialist credit market but the level of demand means it is something which can no longer be brushed aside.
The vote for new legislation is not designed to prevent customers with a less than perfect financial history from accessing credit facilities, but putting measures in place to ensure that everyone receives fair treatment, no matter who provides their loan.