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Regulator may cap interest rates on payday loans

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The government has committed to amend legislation that will include capping the actual cost of credit on payday loans. The changes to the Financial Services Bill will give the new regulatory body, the Financial Conduct Authority (FCA), the power to limit the interest rates charged by payday lenders. The debate in the House of Lords today (28 November) saw the government come close to defeat on the amendment, which it opposed and was tabled by Labour peer Lord Mitchell, according to reports. The cross-party amendment was backed by Baroness Howe, Baroness Grey-Thompson and Lord Welby, the Archbishop of Canterbury elect. The government has now agreed to introduce its own version of the amendment to the bill when it returns for a third reading next Wednesday (5 December). News of the decision came as trade union Unite published the results of a survey that revealed that of those men borrowing from payday lenders and other sources, they are taking out £381 a month on average to “make ends meet”.

 

Men are taking out nearly £100 more each month than women, who are borrowing an average of £282. The union claimed that there is a “growing debt crisis”, as men are being “pushed into the clutches” of what it branded “legal loan sharks”. Len McCluskey, Unite general secretary, said: “Falling living standards and government austerity are forcing ordinary working people into the clutches of these legal loan sharks. Their eye watering interest rates, up to 4,000% a year, are trapping people in a spiral of debt.” The survey of 2,036 people found that males in their 20s are taking out, on average, £397 a month, while women in this age range borrow £308 per month. Unite had urged members of the House of Lords to support Lord Mitchell’s amendment to cap the interest rates offered by payday lenders.

 

Link:http://www.credittoday.co.uk/article/14623/online-news/regulator-may-cap-interest-rates-on-payday-loans


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