Call for interest rate cap on short term loans backed by some in the industry

The debate about the merits or otherwise of the short term loans industry have been debated by just about every parliamentary body in the country with the focus on capping what are seen as excessively high interest rates. The call to cap the rates has received a rather unlikely backer in the form of a director of one of the short term loans companies himself, Gary Miller-Cheevers, director of speedeloans.

The debate about the effects of the short term loan industry on indebtedness amongst Britain’s population was debated in the House of Lords recently and Mr Miller-Cheevers has supported the campaign by the Labour Minister of Parliament, Stella Creasey to cap rates on products like those sold by Mr Miller-Cheevers’ company.

The effects of the growing success and expansion of short term loans has been noted by the Debt Advice Foundation who have said that ten percent of those people who have applied for an instant cash loan did not really need one. The Foundation goes on to say that those people who take out short term loans for things they really don’t need are not helping themselves in the long term and can quickly get themselves much further into debt. The Foundation advises such people to get help with improving their debt reduction skills.

There has been considerable debate and concern over high cost credit loans with charities and trade organisations expressing their worry that this type of product can drive lenders into an ever deepening spiral of debt if they use the loans incorrectly.

Mr Miller-Cheevers said that loans could be expressed in a different way from what they are now, which he thinks can be misleading and leads to confusion. At present, short term loans are usually stated using APR and EAR. As Mr Miller-Cheevers says, these terms are normally reserved for products like overdrafts. He thinks that the loan repayments could be more simply expressed in direct monetary terms.

He went on further to say that this type of short term loan should be more transparent. He said that the term EAR stands for an annual rate of interest, as used for a bank overdraft while an APR takes into account extra fees and charges which EARs don’t. He says that for instant cash loan companies to use these terms almost interchangeably results in customers being confused about exactly what they have to repay.

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