Payday Loans

Lord Richard Excerpts

Tuesday 12th March 2013 Lords Chamber

[Lord Popat]

I thank the noble Lord for that question. Yes, we are expanding credit unions, which offer affordable credit and real help for people who might otherwise borrow money from high-cost lenders such as the payday lenders. The British Bankers’ Association is also looking into this to see what bankers can do to help people with a short-term overdraft or a temporary loan when they are in a difficult situation.

[Lord Richard]

My Lords, many years ago, when I was a young law student, I learnt about the moneylenders Acts, which, as far as I can remember, meant that if you charged an excessive amount of interest you could not recover your money. Does that still apply and, if so, is the way to deal with these payday loans and the excessive interest charged on them to have one or two good civil cases in which the borrower refuses to pay and is taken to court, with the judge then declaring recovery illegal under moneylenders Acts?

[Lord Popat]

My Lords, the consumers—borrowers from payday lenders—are of many different types. A large number of them borrow money from payday lenders as a short-term loan or in an emergency. Some use the payday lending system rather than a credit card; quite often a credit card is very expensive, and they have more control over borrowing from payday lenders than they would have over credit cards. Quite often there are customers who borrow money from payday lenders because the banks, for reasons of liquidity, are often not very keen to give short-term overdrafts.