Payday Loans

Lord Forsyth of Drumlean Excerpts

Tuesday 12th March 2013 Lords Chamber

[Lord Popat]

My Lords, that is why last week’s announcement was about the Government and regulators taking strong action together, both to address current problems quickly and to ensure that a more effective regime will be in place next year. A cap is not recommended by the Bristol University report; a cap will reduce access to credit and will mean fewer lenders. As for lenders going offshore, I do not believe that this is the case yet, but if we bring a cap into place there is a good chance that lenders would rather lend from abroad than from this country to avoid the cap regulation.

[Lord Forsyth of Drumlean]

My Lords, is not the problem with payday loans that people take them out and then take out another loan to pay off that payday loan, so that the loans become larger and larger and the interest rate burden unaffordable? Is that not very similar to the Opposition’s economic policy?

[Lord Popat]

My noble friend makes a very valuable point. That is why the Government are now clamping down on these payday lenders, particularly through our Office of Fair Trading. Unfortunately, the noble Lord is right about the rollover of interest costs, which are quite astronomical to borrowers. That is why enforcement action is being taken as quickly as possible.