Loan Companies: Interest Rates

Lord Kennedy of Southwark Excerpts

Thursday 3rd November 2011 Lords Chamber

Asked by

[Lord Kennedy of Southwark]

To ask Her Majesty’s Government what measures they propose to deal with high street lenders who charge excessive rates of interest, particularly to those on the lowest incomes.

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)]

My Lords, the Government recognise that it is often the most vulnerable who have to pay the highest costs when accessing credit. We are commissioning research into the impact of introducing a cap on the total cost of credit that these lenders can charge. We are also looking at the high cost credit market as part of our consumer credit review and we will publish our final response before the end of this year.

[Lord Kennedy of Southwark]

I thank the noble Baroness, Lady Wilcox, for her response. Does she agree that companies which charge 2,000, 3,000 or even 4,000 per cent are legalised loan sharks? Will the Government look at requiring these companies to put a health warning on their advertisements in highly visible, large type explaining clearly the costs of their services and advising people that their local credit union would offer better value for money?

[Baroness Wilcox]

The noble Lord, Lord Kennedy, has covered three big items. I know what an expert he is on the last one, so I will leave that for the moment. This Government and the previous Government have looked again and again at capping interest rates, but our worry has always been that that would push people towards illegal money lending. We then do not know when they are in trouble and they can be treated very violently. Even looking to see whether we should be changing this in any way is a new venture for us. The noble Lord is absolutely right in his second point. People should have the right information on which to base their choices.