The net is closing in on payday loan firms with both the Church of England and local councils pledging to rid the country of the £2bn industry, which one MP has described as casting “an ugly and toxic web of despair” over consumers.
The Archbishop of Canterbury, Justin Welby, has told Wonga founder and chief executive Errol Damelin that he plans to make the controversial lenders redundant – by helping the 500 financial co-operatives, which already provide small loans to members – play a much bigger role in helping people with money problems.
In an interview with Total Politics magazine, the Archbishop said: “I’ve met the head of Wonga and we had a very good conversation and I said to him quite bluntly ‘we’re not in the business of trying to legislate you out of existence, we’re trying to compete you out of existence.’ He’s a businessman, he took that well.”
The Church of England has already set up a credit union for its own staff, which will advise the other co-ops on how to expand their reach. The Department for Business Innovation & Skills is providing £35m over 10 years to help credit unions grow and has lightened the regulatory burdens on them.
The move follows Plymouth Council’s decision to ban payday loan firms from advertising on poster sites and bus stops within its region, as well as blocking access to the 50 most popular payday loan websites across its entire computer network, including at libraries and community centres.
Chris Penberthy, the cabinet member for community development, said: “Plymouth’s advice agencies are taking calls daily from people who are running up huge debts that are causing stress and hardship to them and their families. We need to protect people and make it difficult for payday loan companies to operate in our city.”
Meanwhile West Ham MP Lyn Brown has spoken out in Parliament against the industry, in support of a Private Members Bill demanding better regulation of payday advertising, requiring firms to display clear information on costs, and obliging them to refer borrowers in financial difficulty to free advice services.
She said: “[Payday loan borrowing] is an ugly and toxic web that brings anxiety and stress to households. It makes it much more difficult to have a stable and resilient family life, and it undermines the entire community.”
Earlier this month, the boss of the new financial watchdog – the Financial Conduct Authority – said the proposed clampdown on advertising could stretch to an outright ban.
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