Thank you to everyone who has contacted me about high-cost credit. I that this important issue and that we need better regulation of consumer lending.
The Financial Conduct Authority (FCA) is responsible for regulating high-cost credit in the UK. I know that in a letter to payday lenders in October 2018, the FCA said they should reassess the quality of their affordability tests. The Government says the FCA has tough enforcement powers to protect consumers and act against firms that do not meet its standards. It states that since 2014, the FCA has been proactive on consumer credit, to ensure that all consumers who use high-cost credit products are treated fairly.
However, I believe we need urgent action from the Government to change this broken model of consumer credit and review the way lending is regulated. The business model of payday lenders such as Wonga, which collapsed in August 2018, is exploitative and immoral. Furthermore, I believe that payday lenders demonstrate much of what is wrong with our economy – too many people are stuck in insecure employment and reliant on short-term debt just to keep their heads above water.
At the recent Budget, the Chancellor announced plans to pair up banks with debt charities to run a pilot no-interest loan scheme. He said that a feasibility study to help design the pilot scheme would be published in early 2019. I believe that this announcement is inadequate and I remain deeply concerned that the Government has overseen the expansion of high-cost problem credit on an industrial scale.
Labour is committed to lifting living standards and tackling the persistent debt spiral that many working families have already become trapped in. We believe we should tackle the issue of high-cost credit by capping exploitative lending, increasing real wages and ending austerity.