With interest rates on instant short term loans drawing ire from critics, the Government has announced it will be conducting an investigation into the feasibility of instituting an interest rate cap on short term loans.
Department of Business, Innovation and Skills parliamentary undersecretary of state, Edward Davey MP, recently addressed Parliament, discussing the response of the government to select issues relating to the personal insolvency and consumer credit review. The MP said that instituting caps on some forms of credit, such as credit cards, would not be in consumers’ best interests, as doing so could drive more consumers into no credit check loans, which have been criticised for the high costs of their interest rates.
However, Mr Davey did say that the review makes it clear that the high-cost credit market is a concern, as consumers who rely upon these sort of loans can be impacted in a negative manner. In response, the Government has decided to appoint the Personal Finance Research Centre of Bristol University to conduct a research study on what kind of effect it would have on the high-cost credit industry if a variable cap were introduced in order to safeguard British consumers.
The government has also begun discussions with the industry itself, said the MP, in regards to introducing improvements to consumer protection in codes of practice for providers of instant short term loans. Mr Davey added that the government is also working to offer improved access to credit unions in order to offer alternatives, adding that the industry has reactive positively to address the real concerns of their customers, stating that doing so will have wide-reaching benefits such as resolving issues in an expedited manner.