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

  • Comment Why Britain’s women won’t “calm down”

    Why Britain’s women won’t “calm down”

    From November 4th until the end of 2014, women across the country will effectively be working for free. The gender pay gap means that women are paid on average 15% less than their male counterparts; we have to work an extra 60 days annually to earn the same amount as a man doing the same job. For black and minority ethnic women, the pay gap is 20%. Women in Britain need a pay rise. It was heartening to see so many […]

    Read more →
  • Featured Get used to hearing a lot more of what Cameron’s Tories really think…

    Get used to hearing a lot more of what Cameron’s Tories really think…

    The revelation earlier this week that government welfare minister Lord Freud had referred to disabled people as ‘not worth the full [minimum] wage’ seemed somewhat familiar – and not only because of the Prime Minister’s repeated assertion that, when it comes to disabled people, anything his government does is above criticism. Fans of longstanding rent-a-reactionary-view Philip ‘why it is so offensive to black up your face’ Davies, Conservative MP for Shipley, will remember that he made the same point in […]

    Read more →
  • News “I rule it out”: Burnham says he won’t be making a leadership bid

    “I rule it out”: Burnham says he won’t be making a leadership bid

    Andy Burnham has been named in several newspapers lately as a possible future Labour leadership candidate, but he was keen to scotch such rumours when he appeared on Marr this morning, saying: “I rule it out… No, I am [a] Labour loyalist to my core. I am loyal to the leader, and the leader of our party, Ed Miliband, has said, the NHS will be his big priority going towards this election. I am 100% focused on developing a plan for the […]

    Read more →
  • News Tory minister: “disabled people work harder because they’re grateful to have a job”

    Tory minister: “disabled people work harder because they’re grateful to have a job”

    Tory Minister Lord Freud was put under pressure this week after he suggested that disabled people were “not worth” the minimum wage. Today another Tory Minister appears to have make similarly ill-judged (and revealing) comments about the Tory Party’s approach to disabled workers. The Independent on Sunday reports that Andrew Selous – the former parliamentary aide to Iain Duncan Smith and now a Justice Minister – told a fringe meeting: “disabled people work harder because they’re grateful to have a job”. […]

    Read more →
  • Comment Our party should welcome a debate with Farage – and we can win it

    Our party should welcome a debate with Farage – and we can win it

    By James Dray and Lewis Iwu Should UKIP be part of the televised election debates? Forget for a minute the question of whether or not Farage should be entitled to be there; instead, let’s look at the real question; can we beat him? A man who significant numbers of people see the rather obvious faults of but still really rather like? A man who decimated Nick Clegg in the European debates? We think that we can, and more importantly, we […]

    Read more →
7ads6x98y