Dumfriesshire, Clydesdale and Tweeddale MP David Mundell has welcomed government action on the high cost of credit.
The Government is concerned about the evidence of the scale of unscrupulous behaviour by payday lenders and the impact on consumers and believes payday loans should be available on fair and reasonable terms.
It has announced new enforcement action and unprecedented changes to the regulation of consumer credit which will send a clear message to lenders that if they do not comply with the rules, action will be taken.
It is giving financial regulators the powers to impose restrictions on the total cost of credit and is also giving the Office of Fair Trading (OFT) a new power to suspend consumer credit licences immediately where there is an urgent need to protect consumers. In the short term, the OFT is cracking down on irresponsible practices and will be putting 50 lenders on notice, demanding they fix the problems within 12 weeks.
The Government is also taking tough action to clampdown on the advertising of payday lending and will work closely with the OFT, Advertising Standards Authority, Committees of Advertising Practice and industry to make sure advertising does not lure consumers into taking out payday loans that are not right for them.
“I am worried about constituents getting into debt, especially those who feel they maybe have no option but to take out loans at unrealistically high interest rates. More needs to be done to protect borrowers and that is why I am supporting the government clamp down.
“I strongly believe firms in the high-cost credit sector should meet high standards, lend responsibly and offer competitively designed and priced products that meet consumers’ needs. Equally, consumers should borrow sensibly, be able to exercise choice and have confidence in the system. Vulnerable consumers should not suffer unnecessary or excessive detriment in these markets and I am glad the Government is investing in alternatives to payday loans,” said the local MP.
Mr Mundell added: “Many of my constituents are concerned about the advertising of some payday loans, so I am glad that from next April the FCA will be able to ban misleading financial promotions.”