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Lib Dem peer pushes for £300 cap on payday loans

Liberal Democrat peer Lord John Sharkey has tabled an amendment to the banking reform bill calling for payday loans to be capped at £300 and 60 day grace periods for all loans.

The Government bill proposes the ring fencing of banks’ retail and investment arms as well as the abolition of the approved persons regime for deposit-taking institutions.

The bill has passed the House of Commons and will go through report stage in the House of Lords next Tuesday.

The FCA will regulate payday lenders from next April with the power to cap the cost and duration of credit, ban adverts and curb debt collecting techniques.

Lord Sharkey’s amendment calls for the maximum payday loan to be £300, excluding fees, and fees capped at 10 per cent of the loan size plus a £3 verification fee.

He is calling for loan terms to be restricted to between seven and 31 days and allow borrowers to extend the loan term for an additional 60 days beyond the due date without any additional charges.

In addition, he believes there should be a 24 hour cooling off period between loans where no new agreement can be entered into.

The peer is also calling for restrictions of one outstanding loan per customer and to establish a database of loans at the lenders’ cost.

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. He should be calling for a statutory cap on the rates of interest these sharks are allowed to charge. If he can’t see that as the worst part of the problem, he shouldn’t be allowed any sort of platorm from which to make such vacuous utterances. In fact, the whole area of unsecured loans needs to be reformed. Limit them to a maximum, from all sources, of 3m nett income and stipulate that all puchases of any sort on credit must be subject to an immediate down payment of not less than 25% of the purchase price. Anyone who can’t manage that shouldn’t be making the purchase.

  2. £300 at 3 million percent??

    What an ass.

  3. There shouldn’t be a cap on interest values or interest rates. If you cap the rates or the amount they can borrow, all it does is reduce the availability of these loans. What are the people who need £400 going to do?

    We need to tackle the underlying issue of people not managing their money correctly. Payday loans provide a valuable service for many, reducing them just removes a symptom, not the cause.

  4. Pay Day Loans (PDL) need a much more careful review. As far as some main lenders are concerned they are an indication that a client is unable to manage their affairs.
    With a PDL on record an otherwise perfectly good application will be declined.
    I tell all of my contacts and clients – PDLs are totally toxic.

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