Committee Calls For Better Payday Loan Practices To Be Implemented
Date: 28 June 2012
Reference: ETI 08/11/12
The Assembly’s Committee for Enterprise, Trade and Investment is calling on payday lenders to raise their standards and not to prey on the vulnerable. The Committee, which received an oral briefing from the Department of Enterprise, Trade and Investment’s Trading Standards Service today, welcomed their call for payday lenders to comply with guidance on irresponsible lending.
The Committee is particularly concerned that many vulnerable people, who have nowhere else to go, are turning to payday lenders that offer instant access to cash but charge high interest rates for short-term loans.
Speaking after the meeting, Chair of the Committee, Alban Maginness MLA said, “Payday lending attracts very high rates of interest and seems to target people who cannot easily access other forms of credit. And it is often those who have the most difficulty repaying even moderate loans who seem to be targeted.
“As a Committee we believe that people should be protected from the aggressive marketing practices employed by these payday lenders. Even under the best regulatory circumstances, high interest rates, high borrowing costs and the facility to roll-over debts to the next month with additional charges can result in people reaching a position of financial despair from which they can see no way out.”
The Committee is also clear that people must be made aware of other ways of paying off debts including negotiating directly with existing creditors and consulting independent advisors such as the Citizens Advice Bureau or AdviceNI for practical help and guidance.
Mr Maginness added, “There are other options open to people who need to borrow money. The credit union movement in Northern Ireland, for example, has a long and commendable history of providing social lending and reasonable interest rates for the benefit of communities and individuals. As a Committee we would encourage people to develop long-term relationships with their local credit union, who can then provide on-going support and advice on money management and budgeting.”
“The Committee is intending to discuss these matters with both the credit union movement and the advice sector early in the next Assembly session. We will also consider what can be done to provide and promote better alternatives to payday lending for people who need ready access to short-term finance.”