The Sheffield Central MP’s ‘High Cost Credit Bill’ proposes to introduce lending limits, cap excessive charges, and require lenders to refer borrowers experiencing repayment difficulties to free, independent debt advice.
The Bill argues in favour of moving interest rates from APR to a more representative system which would instead illustrate the pound cost per hundred pounds borrowed over a thirty day period.
Blomfield said: “Payday money lenders are making millions from extortionate loans to some of the most vulnerable in Sheffield and across the country. In hard times, it’s no wonder that people who are struggling will turn to them for help. But the massive interest rates, rip-off charges and misleading advertising of payday lenders are often just pushing people further into debt.
“So in Parliament I’m putting forward a Bill to properly regulate these lenders and put a stop to their worst rip-off practices which badly exploit those who can afford it least.”
“I’m pleased that the bill has attracted cross-party support and I’ll be building on the work of my colleague Stella Creasy who has done so much to highlight the damage that payday lenders are doing in our communities.”
However, Consumer Finance Association chief executive Russell Hamblin-Boone has responded with a warning to MPs that introducing caps on payday loans risks doing more harm than good.
He said: “While we support many of the measures Mr Blomfield is seeking to introduce across the industry, and which larger lenders already have in place, MPs will need to do their homework before voting for this Bill.
“A government study has already found that capping will cause more problems than it solves and, MPs will need to be careful that we don’t end up with another Dangerous Dogs Act that seemed like a good idea but caused more problems than it solved.”
The second reading of the bill will take place on 12 July.
The Office of Fair Trading (OFT) previously gave the UK’s 50 leading payday lenders 12 weeks to change their business practices or risk losing their consumer credit licenses.
The regulator recently came under fire in a Public Accounts Committee (PAC) report which accused it of being “ineffective and timid in the extreme” over its failure to tackle loan sharks and payday lenders.
Citizens Advice says the bill represents a step towards protecting people from “predatory” practices.
