Capping Payday Loans Is a Step in the Right Direction, but Why the Wait?

In response to today’s announcement from the Government to introduce a new law to cap the cost of payday loans, Will Becker, CEO and co-founder of comments:

“At last, the Government is taking action against the damage payday lenders continue to inflict on large segments of the UK population. However, after waiting far too long to take action, the speed at which these new regulations will be implemented is a great concern – why do we need to wait until 2015 for caps? The more time that elapses, the more vulnerable victims will be sucked into what I can only describe as the Venus fly trap of consumer lending.”

“Chancellor Osborne cited evidence from Australia that caps on rates can be effective as a pre-cursor for acting. But such evidence has been available for years. Most US States have successfully imposed caps on interest rates for many years so the question is, why did it take our Government so long to act in the face of so much evidence that rolled-over payday loans are damaging our economy?”

“However, this is also an industry issue. Consumers are only opting for payday loans because there have been few alterative solutions. Better value alternative solutions, such as the UK’s first nationwide credit union from My Community Bank which was launched today, could prevent short term cash-flow problems turning into debt spirals. In particular, the mainstream lending industry needs to match payday’s convenience and immediacy. Lenders such as Wonga have made it much easier and speedier to borrow – and consumers have shown they will pay a premium for such convenience. The Government can only go so far to protect the consumer from expensive lending, financial providers really need to step up to the plate and provide affordable alternatives that offer competitive speed and access.”