Tuesday, 20 December 2011

It is time to stop the “irresponsible lending” of “legal loan sharks”

In my column for this week's Cornish Guardian, I have condemned the impact of short-term and "payday" loans on the less-well-off. The article was as follows:

I would like to start my column by wishing all readers of the Cornish Guardian a very Happy Christmas, as well as a healthy and prosperous New Year.

I would also like to thank everyone who has taken the time to read my column over the last twelve months, especially those who have contacted me to discuss issues and/or encouraged me with positive comments.

The Christmas and New Year period is a truly wonderful time that brings friends, families and communities together. Many will also celebrate their faith, while others will simply take a break and recharge their batteries for the coming year.

Whatever you have planned, I sincerely hope that you have a great time and enjoy the festivities.

But Christmas can also be a costly and difficult time for individuals and families on low incomes.

This is particularly the case this year. The ongoing economic problems mean that the cost of living continues to rise, while incomes remain static or decline in real terms.

Many families are already struggling to make ends meet, some are seeking help from food banks, whilst facing the additional pressures of the Christmas period such as buying presents for children and grandchildren.

It is little wonder that so many people are predicted to fall into debt or descend into even more debt.

I am disgusted that there is an ever-growing group of companies preying on people with offers of short-term small loans, but at extortionate levels of interest.

These include so-called “payday loans” (to cover bills in advance of the next pay cheque) with interest rates as high as 4,000 per cent.

I consider it a scandal that such loans, targeting low earners and the vulnerable, are continuously being advertised on television.

It is also the case that, if the “payday loans” are not paid back in full very quickly, the debt escalates rapidly. Thousands are already termed “zombie debtors,” struggling to pay back the interest while never reducing the capital element of the debt.

The situation is so dire that research has suggested that 3.5 million adults are considering taking out such a payday loan over the next six months.

Surely now is the time for central government to take action to protect the best interests of the less-well-off, to increase regulation of the financial sector, and tackle the exploitation of what one MP has described as “legal loan sharks” with their “irresponsible lending.”

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