Did card reform not go far enough?
Some consumers want interest rate cap set on all unsecured credit
By UK CreditCards.com
Britons are fully supportive of moves to tighten the conditions lenders are allowed to apply to their products, according to a new study.
Caps and new sources of credit
The YouGov research, commissioned by campaign group Compass and Trident Reach, revealed that 68% of respondents are eager to see the government introduce a rate cap on all forms of lending, including credit cards. In addition, it showed that seven in 10 Britons are in favour of gaining access to alternative sources of affordable credit, through a Post Office bank, credit unions and Community Development Finance Initiatives.
A challenge to credit market reforms
The findings appear to challenge the new credit market regulations set to come into force at the end of the year following a consultation by the Department for Business, Innovation and Skills. The government is planning to allow regulators to define and ban excessive interest rates on store and credit cards from January 4, 2011. However, the changes do not include a pledge to cap the rates applied to sections of the unsecured credit industry, such as payday loans, home credit, pawnbroking and rent to buy.
'Key test' for the coalition government
Gavin Hayes, general secretary of Compass, suggested that the research indicates that Britons feel that the plans for credit reform "do not go far enough." He claimed that how the government responds to the findings will be a major test of its stated intention to create a fairer society.
"The public feels that just capping excessive credit and store card rates falls short," he said. "They want caps on the cost of credit to cover the whole of the unsecured credit sector that causes so much misery for thousands of people in the UK that can least afford it."
Payday loans fears
The study comes after similar research released last month found that the number of people taking out payday loans has quadrupled in the past four years. The Consumer Focus report revealed that the average payday loan has reached £294 and that two-thirds of customers have a household income of less that £25,000.
Meanwhile, citizens groups, campaigners, MPs and celebrities have joined forces to launch the 'End Legal Loan Sharking' campaign, with 40,000 members already signed up. The movement is hoping to convince the government to extend its new guidance for regulators to all forms of credit, particularly the type of high-interest loans which make lenders £16,000 per hour in excessive profit, according to figures published by the Office of Fair Trading.
Published: 2 September 2010
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