Move to cap payday loans welcomed
The Association of Christian Financial Advisers has welcomed the announcement today on the Government's plans to introduce a cap on payday loans.
The ACFA previously wrote to Chancellor George Osborne in 2011 asking for interest on personal debt to be limited to the same level charged by credit unions, with a maximum APR of 15%.
They have also led a long campaign against loan sharks preying on those who have been hit hardest by the recession by offering quick cash in return for astronomical interest rates - sometimes as high as 5000%.
"We are delighted the government has finally heeded calls to protect the poor and end this culture of exploitation," ACFA spokesman Arwyn Bailey has said.
"Now, a fair cap must be set on interest rates and credit charges across the board."
The cap will be included in the Banking Reform Bill, which is currently going through parliament. George Osborne has confirmed that there will be controls on charges, including arrangement and penalty fees, as well as on interest rates.
The level of the interest rate cap is as yet unannounced and the ACFA said the legislation would need to be carefully worded to prevent payday lenders from recouping their costs in other areas.
They are also calling for a mandate that says lenders must have tighter controls to ensure that borrows can afford to pay them back.
"A fair model must also now be set to make sure interest rates don't get out of hand in the future," said Mr Bailey.
"The Chancellor would do well to look at examples from Australia and Japan."
ACFA also called for action to encourage credit unions, which offer lending at fair and manageable rates.
It follows recent calls from the Archbishop of Canterbury asking Christians to support their local credit unions earlier this year, a move which has been taken up by bishops up and down the country in recent months.
Bishop Christopher Foster of Portsmouth stated in response that "campaigning against this kind of social injustice is a core part of our Christian calling."