UK needs a fair lending law to stop loan sharks, says nef
November 25, 2009
A report exposing the multi-billion pound market in high-cost loans to people on low incomes will be published by nef (the new economics foundation) at the London Citizens Assembly being held at the Barbican Centre, London, today Wednesday 25 November 2009.
The report, Doorstep Robbery: Why the UK needs a fair lending law, argues for a cap on the cost of credit as well as new rules which would oblige banks to make more loans available to the less well-off.
Doorstep Robbery reveals that some 3 million UK households pay hundreds of thousands to “legal loan sharks” because of lack of access to credit from banks. The Office of Fair Trading estimates that high-cost lending in the UK is worth £35bn a year.
nef’s report argues that the UK should follow the example of major European countries and introduce a cap on the cost of lending by financial institutions (at a rate to be determined), to make excessive interest rates (in some cases as high as 500%) illegal. Doorstep Robbery shows that in Germany and France poor people enjoy greater access to mainstream credit than in the UK – disproving the Government’s stated objection that such curbs reduce the flow of credit.
nef is joining London Citizens and other civil society organisations at the Assembly to challenge politicians and bankers to introduce European-style curbs on excessive interest rates. Some two thousand people from more than 150 organisations are expected to gather to call for a cap on interest rates and the extension of the living wage. Concerned at the impact of the financial crisis on ordinary people, London Citizens, as the capital’s largest civic alliance, is calling for these and other measures in order to soften the impact on ordinary people of the financial crisis.
Veronika Thiel, author of the report, said: “Unlike many European countries, the UK doesn’t create an environment where people on all income levels have access to affordable credit and doesn’t cap the cost of it. Lenders can refuse to lend to anyone for any reason, and they can charge any price – be it 500% or 5000%. In other words, there is no fair lending ethos in this country. Legislation that would stop these practices has been rejected by Government based on flawed evidence. Together with London Citizens, we call for a cap on the total cost of credit, legislation to make banks offer affordable lending to the poorest, and measures to raise the incomes of the poorest.”