Crisis of credit

September 17, 2010 5:51 pm

Author:

Share this Article

By Christopher Evans MP

Credit UnionsSadly, for anybody who grew up in the South Wales Valleys, the credit crunch was nothing new. Indeed many people have been suffering from a crisis of credit in constituencies like mine for many years.

For too long, low-income families and the vulnerable in town and villages in communities around the country, such as those in the valleys, have been targeted as easy prey by doorstep-lenders and other loan sharks.

Indeed, I can well remember as a child, the woman from the Provident, a doorstep lender which charges loans at sky-high interest rates hammering on doors while people cowered inside because they did not have the money to pay her.

Unlike many other EU countries, the UK does not guarantee people legal access to affordable credit. Lenders can refuse to lend to anyone, for any reason, and they can charge any price for their lending. They can, and do, impose interest rates at percentage rates in the thousands.

After deciding to make this the topic of my maiden speech in the House of Commons, I carried out some research into the matter and what I found was shocking. Safeloans Limited, for example, charge a typical annual percentage rate of 2,120.1% on 30-day loans.

Another company, Wonga.com Limited, charges a typical APR of a staggering 2,689%. You can imagine my chagrin when I tuned in to Match of the Day recently and noticed that they are now the official shirt sponsor of Blackpool Football Club, thus providing their high interest lending with a legitimacy that they do not deserve.

Things are made worse when the majority of high street banks do not lend sums under £1,000, driving people who want to borrow smaller amounts into the hands of these unscrupulous companies with their high interest rates.

To me, extortionate rates of interest are simply disgraceful, and we should not allow such unscrupulous companies to take advantage of the vulnerability of some of the poorest in our society.

In the present financial climate, I am seriously concerned that extortionate lending is going to become widespread and will remain unchecked by the Con-Dem coalition.

So how do we combat this? The answer lies in providing support for credit unions, which provide credit at reasonable rates to people who would otherwise not have access to it. Credit unions are committed to building its members’ wealth. The last government provided £98.75 million-worth of support to credit unions and community development finance institutions, which provide support for small businesses. Labour also legislated to ensure that credit unions can fairly compete with mainstream providers of financial services.

As a result of these measures, credit union membership has more than doubled since 2000; yet strengthening the credit union movement is only a small step in tackling financial exclusion. However, we can go further banks should be required to provide bank accounts to all consumers with a valid address, the Post Office should be transformed into a people’s bank, and a cap on interest – especially on smaller sums – should be introduced.

If we are to be serious about fighting financial exclusion, these measures, together with support for credit unions, should be at the heart of our policies in the coming years.

This week the Welsh Assembly Government announced £3.4 million to support the growth of credit unions, providing universal access across Wales and giving everyone access to affordable financial services.

Comments are closed

Latest

  • News Why are the Lib Dems so shy?

    Why are the Lib Dems so shy?

    Regular readers will know that we’re always keeping an eye on Lib Dems leaflets. Their local propaganda sheets are always good for a questionable bar chart, or forgetting the name of the generic place their text is for – but they can also be quite shy about their party affiliation too. For example, take the “Islington Chronicle”. Sounds like a local paper, and there’s no Lib Dem logo and barely a splash of their trademark yellow. But it is, in […]

    Read more →
  • News Scotland Seats and Selections Have the Tories given up on Scotland?

    Have the Tories given up on Scotland?

    This morning we noted that the Tories haven’t selected candidates in nearly half of the most marginal Labour and Lib Dem seats. But what’s particularly telling is that in over 60% of target seats in the Midlands and the North they have so far failed to select a candidate, while the Independent claims that in Scotland there are no Tory parliamentary candidates at all. However, Mark Wallace over at ConHome notes that the Tories have in fact selected a total of two […]

    Read more →
  • News Labour go on UKIP offensive

    Labour go on UKIP offensive

    Labour have gone on the attack against UKIP, following the launch of their European election campaign over the weekend. Releasing a statement from Jon Ashworth, the Shadow Cabinet Office Minister, the response focusses on how right-wing UKIP are - suggesting this change of tack is to designed to put Labour supporters off switching their vote to Farage’s party. Ashworth said: “UKIP would have us believe they stand for working people but the truth is very different – they’re even more right […]

    Read more →
  • News Seats and Selections Tories yet to select candidates in nearly half of marginals

    Tories yet to select candidates in nearly half of marginals

    Out of the 75 most marginal Labour and Lib Dem held seats, the Conservatives have selected only 41 candidates for the next election, according to the Independent. Labour, on the other hand, have selected candidates in all but two of their top 50 target seats: With only a year to go until the general election, this shortage seems to suggest the Tories are not expecting to gain many seats. By this stage in a parliament, a party hoping to make […]

    Read more →
  • News Scotland Brown teams up with Darling for Scottish independence intervention

    Brown teams up with Darling for Scottish independence intervention

    Gordon Brown will today enter the debate on Scottish independence with a speech making the case for a No vote in the referendum. The intervention sees Brown link back up with his former Chancellor Alistair Darling, who is Chair of the Better Together campaign. Darling said: “I am very pleased that Gordon Brown is to deliver this speech on Tuesday.  His 30 years of experience inform his powerful argument that Scotland can benefit from both seizing the opportunities that come […]

    Read more →