The Chancellor has announced that the government will introduce legislation to cap the cost of payday loans.
The cap will be implemented through changes to the Financial Services (Banking Reform) Bill that is currently going through Parliament. The government had previously accepted an amendment to the Financial Services Bill at the end of last year, enabling the newly formed Financial Conduct Authority to cap interest rates if it felt that firms were charging extortionate interest rates.
The latest amendments will now put a duty on the FCA to use those powers to impose a cap.
Damian has raised the issue of payday loans on numerous occasions, both in his capacity as an MP and as chairman of the All-Party Parliamentary Group on Credit Unions.
The announcement came on the same day that Damian helped launch a payroll deduction initiative for Parliamentary employees, in conjunction with Labour peer Lord Kennedy of Southwark and London Mutual Credit Union. This was launched not only to encourage staff in Parliament to build up their savings, but also to make Parliament an exemplary employer with regards to this initiative and to spread awareness of credit unions amongst MPs.
Damian Hinds said:
“I have been campaigning on issues surrounding high-cost credit since before I was elected to Parliament.
“Payday loans have been increasing rapidly in number and lenders all too often give out money without taking reasonable steps to ensure that consumers are able to pay it back. Credit has seemed too easy to get, but the cost can be sky high. Hundreds of thousands of people have found themselves trapped in debt spirals as a result.
“Some time ago I concluded that a cap on total charges was necessary, and have called for this in Parliament and more recently as a supporter of the cross-party ‘Charter to Stop the Payday Loans Rip-Off’.
“I am delighted that the government is making this bold move and I will now work with colleagues in Parliament to ensure that the cap is well-designed and effective.”