Call for credit cost cap
The Association of Christian Financial Advisers (ACFA) calls for a cap on the cost of credit
The Association of Christian Financial Advisers (ACFA) is calling for a cap on the cost of credit. The call follows new research from R3, the Association of Business Recovery Professionals, which shows that people with payday loans are racking up overdrafts to pay them off.
According to the figures, forty per cent of people who took out payday loans to ease their financial situation said it made matters even worse.
One in five adults in Britain said they are ‘very’ or ‘extremely’ worried about their current debts – up from just twelve per cent in February. Of these, ten per cent said that they are worried about debt from short-term, high-interest loans. Eighteen to twenty-four year-olds are those most concerned over short-term loan debt.
Liz Bingham, president of R3, said: ‘Although the economy is starting to pick up, many families are finding themselves left behind, weighed down by the cost of the day-to-day… There is a sizeable chunk of the population in a very precarious position.’
The government has confirmed that it will not impose a cap on credit. Jo Swinson, minister for employment relations and consumer affairs, said: ‘That could shut down short-term loans and force people towards illegal loan sharks or other extreme measures. The solution needs to be more sophisticated.’
The Financial Conduct Authority (FCA) will have specific powers to impose a cap, should they deem it appropriate, once they take over responsibility for consumer credit in April 2014.
‘How much more evidence does the government require before taking decisive action?’ asked Arwyn Bailey, spokesperson for ACFA. ‘The government must act immediately to cap interest rates and curtail one of the clearest social evils of our day. It must withdraw the legal sanction for usury – excessive and immorally high interest rates.’
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