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UK: Potentially good but also bad news in sight for those that want to see predatory lending practices curbed

While the UK parliamentarians will indicate their preferences with regard to interest rate ceilings in the UK, the industry has been trusted to develop responsible behaviour with rgeards to dangerous secured lending in the form of bills of sale (as opposed to banning them outright). Let's see how both turn out..

News from the CfRC January e-newsletter:

Stella Creasy MP secures Commons vote on rate caps

On 3rd February the House of Commons will vote on a motion calling for the introduction of price caps on consumer credit lending. The vote was secured by Stella Creasy, Labour MP for Walthamstow, who has gained cross party support on the issue from the Backbench Business Committee and whose Consumer Credit (Regulation and Advice) Bill contains more details of the measures being proposed, including a proposal to place a levy on the credit industry to pay for money advice services. Stells Creasy was joined by Justin Tomlinson, Conservative MP for North Swindon, and nearly forty MPs as co-signatories to the motion.

Speaking after the meeting of the Committee, Stella Creasy said:

"I'm delighted that we have now secured a formal vote on how to tackle legal loan sharking and that the Backbench Business Committee has made this their top priority for parliamentary time. The sheer number of MPs who put their name to this motion and who turned up to the meeting shows the strength of feeling across all parties about regulating high-interest lenders, and the determination to make the Government act. The vote now means MPs have a clear opportunity to tell the Government they want action to regulate these companies who prey on the poorest consumers in Walthamstow and beyond - I hope they will join me in voting for this motion to make sure it is passed."

A European Commission report on the operation of ceilings in 14 member states provides further support for the campaign and highlights the need for careful consideration of the level and form of any ceiling. CfRC have written to MPs over the weekend pointing out its findings. A copy of the letter can be obtained here. and the full report from the Commission, which is consulting on its findings through to 22nd March can be found here.

The vote will be followed in the evening of the 3rd February by a Parliamentary Rally to support Stella Creasy's private members bill which proceeds to its second reading the following day.

Compass and Church Action on Poverty have both called on supporters to lobby their MPs in advance of the vote and Compass has provided an easy to use online tool for this purpose which is available here.

Government backs down over Bills of Sale ban

The Department for Business, Innovation and Skills has indicated that it will not be proceeding with a proposed ban on Bills of Sale - which have been used to facilitate high cost loans secured on cars ('log book loans').

Banning the use of Bills of Sale was proposed by the previous Government, and received widespread support from consumer agencies in the Department's consultation on the issue. However, the Department has indicated that it will not be proceeding with a ban and that it will instead be providing the industry with "...an opportunity to put its own house in order first. This is consistent with the Government’s approach to policy making of pursuing alternatives to regulation and only regulating when it is clear that policy objectives can’t be achieved by self-regulatory or non-regulatory approaches."

The Department maintains that a 'credible' code of practice has now been drawn up by the Consumer Credit Trade Association and will be operated from 1st February onwards. The Code places an obligation on bills of sale providers to trade honestly and responsibly, and to treat customers fairly, and also limits the practice of ‘balloon payments’ to those seeking a loan for business purposes. It makes clear that any charges on customers in arrears must be transparent and limited to doing no more than covering the lenders costs and that alternative payment plans must be allowed for customers in difficulty. In addition the code contains an agreement that consumers who are in arrears will have an option to voluntary surrender their vehicle as full and final settlement of all claims against the customer. Where a vehicle is repossessed as a result of default, the lender must ensure that it is sold for the best obtainable market price.

Further details are contained in the BIS response to the consultation.


ID: 46686
Publication date: 31/01/11
   
 

Created: 31/01/11. Last changed: 01/02/11.
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