Adrian Sanders backs campaign to clampdown on the extortionate cost of credit

MP joins broad coalition calling on government to end 'legal loan sharking'
 

Today Adrian Sanders MP joined a broad coalition of citizens groups, campaigners, MPs and celebrities who have called on the government to end legal loan sharking. Currently lenders can charge any price for credit which means some loan and credit companies charge £82 for every £100 lent. Annual interest rate charges of over 2500% are also now common (despite the Bank of England base rate being just 0.5%). Borrowing at these rates repeatedly tips customers into inescapable cycles of debt and poverty. According to the OFT £16,000 of excess profit is made every hour in this sector.

Co-ordinated by the Compass pressure group, this new campaign coalition have called on the government to ban excessive prices for credit and provide alternative sources of credit through CDFIs, credit unions and a post bank. The government has pledged to clampdown on interest rates for credit and store cards and the campaign believes it should do the same for the high cost credit market.

Thousands of people across Britain are expected to sign an online petition on a brand new interactive website at www.endleagalloansharks.org.uk. The campaign will be targeting millions of people across Britain through using social networking sites such as Twitter and Facebook.

Adrian said: "It is ridiculous that those on the lowest incomes often have to pay astronomically more to borrow even small amounts of money.  We really need to see a cap on interest rates and a robust system of credit unions and a post bank to provide an ethical financial system for the nation’s most vulnerable.”

Gavin Hayes, General Secretary of Compass said: " As we pack our flexible friends to take away on holiday it is now becoming clear that more and more of us are also using credit to make ends meet. Yet credit and loan companies are legally allowed to charge whatever they like for borrowing money. Door to door lenders are now charging £83 for every £100 borrowed, whilst some online pay day lenders charge a whopping 3000% APR. This is legal loan sharking, a national scandal which must come to an end. Now is the time for caps on all consumer credit and real affordable alternatives through a post bank.

Neil Jameson, Executive Director of Citizens UK said: "Citizens UK have spent most of 2009 in conversation with thousands of members who confirmed the need for money to be controlled and for the reintroduction of anti-usury legislation as a reasonable response from civil society in light of the economic crisis. This proposal was lodged with all political parties before the election and whilst were glad the coalition has agreed to cap store cards and agree to a review of credit and interest rates, Citizens UK is delighted to add our weight and mandate to continue to lobby for a cap on commercial lending."

For further information contact Gavin Hayes on 07900 195591 or Joe Cox on 07796 884487 

Notes for editors:
1. Compass is the UK's most influential political pressure group with over 40,000 members and supporters across the UK. Together we campaign for a more democratic, equal and sustainable society.

2. See http://www.endlegalloansharks.org.uk/ for more information about this campaign

3. The full campaign statement reads:

The UK now has one of the highest levels of personal debt in the world - in April this year the British people owed over £1,460bn in private debt. Debt has become part and parcel of everyday life - many of us owe money on a credit card, loan or overdraft. Borrowing money can be beneficial, personally and economically, as is the case with student loans, business loans and mortgages. However, there is a tipping point at which borrowing becomes detrimental to the borrower. Irresponsible lending can cause debts to become unmanageable: some loan and credit companies are charging annual interest rates equivalent to over 2500% (despite the Bank of England base rate being just 0.5%). Borrowing at these rates repeatedly tips customers into inescapable cycles of debt and poverty. High debt repayments are linked to rent, council tax and utility arrears, constraints on job seeking behaviour, poor diets, cold homes, and mental and physical health problems. This is legal loan sharking, a national scandal which must be stopped. In response to our growing private debt crisis we believe now is the right moment to adopt the policy of lending rate caps for all consumer credit.

Affordable short term credit is needed more than ever to help make ends meet as people face huge cuts in public services, reduced working hours, stagnant wages, and unemployment. Despite this because millions on lower and middle incomes are not catered for by many High Street banks, they have no choice but to borrow at usury rates. As a result, those most in need often pay the highest rates to obtain credit. Around 3 million people use high cost door to door loans which often charge £83 in interest and collection charges for every £100 borrowed.

Irresponsible high cost lending played a key role in causing the credit crunch, and the ensuing worst economic crisis for over 60 years. Financial institutions are now using the economic crisis as a means to make profit from the most vulnerable in our society.

The government has committed to regulate excessive interest rates on credit and store cards, and yet is paradoxically allowing the much more pernicious practice of legal loan sharking to continue. 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.

The policy of lending rate caps coupled with increasing access to affordable credit would enable the poorest households to become financially independent, helping to provide a route out of personal debt, encourage saving practices and generate demand for local businesses in our deprived communities. It would also reduce the demand for social and welfare services and therefore relieve pressure on public spending.

The government should therefore take urgent action to put an end to high cost predatory legal loan sharking for good and introduce lending caps to cover all forms of consumer credit. Many countries across the world have shown that such a cap is viable, we need to follow their lead.

4. Full list of signatories to the campaign statement:

Aaron Porter, President, NUS
Adrian Sanders MP (Lib Dem) – Torbay
Alan Whitehead MP (Labour) – Southampton Test
Alex Cunningham MP (Labour) – Stockton North
Andrew George MP (Lib Dem) – St Ives
Ann Pettifor, Advocacy International
Baroness Helena Kennedy QC
Benjamin Fry (BBC Spendaholics)
Bill Esterson MP (Labour) – Sefton Central
Billy Hayes, CWU
Bob Russell MP (Lib Dem) – Colchester
Caroline Lucas MP (Green Party) – Brighton Pavilion
Cat Smith, Compass Youth
Cathy Jamieson MP (Labour) – Kilmarnock and Loudoun
Child Poverty Action Group
Chuka Umunna MP (Labour) – Streatham
Citizens UK
Dai Havard MP (Labour) – Merthyr Tydfil and Rhymney
Damon Gibbons, Debt on our Doorstep
Dave Anderson MP (Labour) – Blaydon
Dave Prentis, Unison
David Hall-Matthews, Social Liberal Forum
David Rodger, Debt Advice Foundation
Derek Twigg MP (Labour) – Halton
Dr Martin Parker, University of Leicester School of Management
Dr. Sally Ruane, De Montford University
Eric Illsley MP (Labour) – Barnsley Central
Gavin Hayes, General Secretary, Compass
George Howarth MP (Labour) – Knowsley
Gisela Stuart MP (Labour) – Birmingham Edgbaston
Glenda Jackson MP (Labour) – Hampstead and Kilburn
Howard Reed
Ian Murray MP (Labour) – Edinburgh South
Jenny Chapman MP (Labour) – Darlington
Jim Dobbin MP (Labour) – Heywood & Middleton
Jim Dowd MP (Labour) – Lewisham West and Penge
Joe Benton MP (Labour) – Bootle
John Griffiths AM (Labour) – Newport East
John Hemming MP (Lib Dem) – Birmingham Yardley
John Hilary, Chief Executive, War On Want
John McDonnell MP (Labour) – Hayes and Harlington
John Pugh MP (Lib Dem) – Southport
John Thurso MP (Lib Dem) – Caithness, Sutherland and Easter Ross
Jon Cruddas MP (Labour) – Dagenham & Rainham
Jonathan Rutherford, Professor of Cultural Studies Middlesex University
Kamaljeet Jandu, National Officer, GMB
Kate Green MP (Labour) – Stretford and Urmston
Katy Clark MP (Labour) – North Ayrshire and Arran
Kelvin Hopkins MP (Labour) – Luton North
Ken Livingstone
Kerry McCarthy MP (Labour) – Bristol East
Lilian Greenwood MP (Labour) – Nottingham South
Lindsay Mackie, New Economics Foundation
Lisa Nandy MP (Labour) – Wigan
Lord Puttnam
Mark Durkan MP (SDLP) – Foyle
Mark Lazarowicz MP (Labour) – Edinburgh North and Leith
Mark Serwotka, PCS
Marsha Singh MP (Labour) – Bradford West
Martin Horwood MP (Lib Dem) – Cheltenham
Michael Connarty MP (Labour) – Linlithgow and East Falkirk
Michael Meacher MP (Labour) – Oldham West and Royton
Mick McAteer, Financial Inclusion Centre
Mike Hancock MP (Lib Dem) – Portsmouth South
Neal Lawson, Chair, Compass
Nia Griffith MP (Labour) – Llanelli
Niall Cooper – Church Action on Poverty and Get Fair Coalition
Nick Dakin MP (Labour) – Scunthorpe
Nick Isles
Oliver James, Clinical psychologist
Fr Paul D Butler, The rector of S.Paul w. S. Mark, Deptford
Paul Flynn MP (Labour) – Newport West
Paul Hackett, The Smith Institute
Paul Kenny, GMB
Phil Wilson MP (Labour) – Sedgefield
Prof Colin Crouch, Warwick Business School
Prof Danny Dorling, University of Sheffield
Prof George Irvin, University of London, SOAS
Prof Prem Sikka, University of Essex
Prof Richard Wilkinson, Emeritus Professor of Social Epidemiology
Prof Ruth Lister, Loughborough University
Prof Stefano Harney, QMUL
Prof. David Byrne, University of Durham
Professor Peter Case, Bristol Business School
Rachel Reeves MP (Labour) – Leeds West
Reverend Paul Nicolson – Chair of Zacchaeus 2000 Trust
Richard Murphy, Tax Research UK
Robert Philpot, Progress
Roger Godsiff MP (Labour) – Birmingham, Hall Green
Ronnie Campbell MP (Labour) – Blyth Valley
Sally Hunt, UCU
Stephen Gilbert MP (Lib Dem) – St Austell and Newquay
Stephen Twigg MP (Labour) – Liverpool West Derby
Stewart Lansley, author
Stewart Wallis, Chief Executive, New Economics Foundation
Sunny Hundal, Liberal Conspiracy
Susan Jones MP (Labour) – Clywd South
Teresa Pearce MP (Labour) – Erith and Thamesmead
Toby Blume, Urban Forum
Tom Brake MP (Lib Dem) – Carshalton and Wallington
Tony Robinson
Tony Woodley, Unite
Will Straw, Left Foot Forward
William Bain MP (Labour) – Glasgow North East
Yvonne Fovargue MP (Labour) – Makerfield