Payday loans 'sucking money' from poor, say assembly members
- 25 January 2012
- From the section Wales politics
Companies that offer short-term loans at high interest rates have been accused of "sucking money" out of poor communities by Welsh assembly members.
The Welsh government was urged to work with councils and voluntary groups to promote alternatives to payday loans.
Assembly members expressed concern that it was becoming increasingly easy to borrow money through websites and smart phones.
But industry representatives said they did not target the poor.
Payday loans are designed to tide people over for short periods.
A motion noting the "extremely high rates of interest" received cross-party backing in the Senedd on Wednesday.
Plaid Cymru AM Simon Thomas said it took him 20 minutes to find an offer of a £400 loan online with an interest rate of 4,214%.
He said the debate was an opportunity to show "how dangerous this growth in payday loans can be".
"This is the plague of selling loans to our most vulnerable people without adequate regulation or care," he said.
He said there was a role for payday lenders and they should not be banned, but called for a cap on "excessive" interest rates.
John Lamidey, CEO of the Consumer Finance Association (CFA), said payday loan companies were not lending to the same people as doorstep lenders.
"Our demographic - our customers - isn't people on low incomes, it's not people on benefits," he said.
"We are not operating in that market."
Area of concern
The CFA represents eight companies, making up about 70% of the payday loan market.
Mr Lamidey added: "We are helping people and the sort of people we are helping are people with variable income."
Research by the Office of Fair Trading said a quarter of customers earned between £15,000 and £19,000 a year, and 29% earned at least £23,400.
Citizens Advice said payday loans were a growing area of concern, although the number of clients with debt problems who mention payday loans is "relatively small".
About 4% of its debt clients in England and Wales have payday loans, compared to 1% in early 2009.
Local Government Minister Carl Sargeant said the government had supported the expansion of credit unions, which are now available in all 22 counties.
An advertising campaign will be launched next month to promote credit unions on daytime television.