Government posturing increases the risk of getting eaten by the sharks

By Stella Creasy MP / @stellacreasy

Tackling the problems caused by legal loan sharking is quickly moving up the political agenda – and with good reason. Every day high cost credit companies are able to lend to people at extortionate, yet legal, rates of interest is a day more and more Britons could get into unaffordable levels of debt. We know that of the 46% of UK households who cannot make ends meet, 10% say it is because of their repayments on high cost credit products; on the payday loans, doorstep credit and hire purchase agreements they have signed up for as they try to juggle their family finances. MPs from across all parties want this regulated and the government themselves say they recognise something needs to be done, so the question remains, why to date have we not seen any action?

This week we may have our answer. As the House of Commons gets ready to debate and vote on proposals to force the government into dealing with legal loan sharking on Monday evening, news comes the government is actively considering capping the costs of credit. This is a potentially fantastic development – except there is a catch. If rumour is to be believed, the government will vote no on Monday so that an announcement can be made at Lib Dem Party Conference in the autumn. Thus there will be a delay on implementing this key policy for vulnerable consumers simply so a Lib Dem minister can announce it as an example of their civilising effect on the coalition later in the year and then bathe in the glow of happy party faithful.

Four months may not seem long to wait, but this is an business rapidly expanding across our high streets and online. The payday lending industry alone is three times as big as it was two years ago and the total value of the high-cost credit sector is estimated at £8.5bn, dwarfing the value of the credit union movement. Major players drawn here by the lack of regulation like the Money Shop have already announced plans to quadruple their stores in the year ahead whilst online lenders Wonga secured an additional £73m from the Wellcome Trust to increase its operations. Last month alone, Moneysupermarket.com reported a 58% increase in the numbers of people applying for payday loans through their site as the cost of living spirals and wage freezes squeeze family incomes. The pressure to make ends meet means that every day that we delay capping the costs of credit is costing them money and pushing more and more households into debts they cannot afford.

It’s also disrespectful to those Lib Dems and Tories who support action on loan sharking. We know many activists have been critical of their MPs reluctance to back the proposals to cap the cost of credit put forward earlier in the year. I welcome the support of the Social Liberal Forum for caps on the cost of credit – and their internal pressure within the Liberal Democrats on this issue. I know too they would be horrified to think that action on this is being postponed for their benefit – and will be speaking to Lib Dem MPs accordingly over the weekend.

For the sake of thousands of consumers up and down the UK who are suffering every day the government doesn’t tackle the legal loan sharks, we should not let this cynical ploy go unchallenged. A yes vote on Monday to New Clause 11 of the Finance Bill will force the government come clean on what they plan to do to tackle legal loan sharking. I’m certainly not going to let up in holding them to account for their conduct on this – please help by lobbying your MP to do the same. Ask them to put the needs of vulnerable consumers ahead of choreographing coalition dividing lines for conference season.