Welsh assembly members have slammed providers of short term loans, accusing them of ‘sucking money’ from low income earning communities, instant cash loan experts recently reported.
Assembly members have urged the Welsh government to work hand in hand with voluntary groups and local councils in order to promote alternatives to payday advance services, citing that it has become too easy to take out payday lending from smart phones and over the internet. However, representatives from the payday lending industry disputed the fact that they were targeting poor households in Wales.
Payday lending is specifically designed to provide short-term debt relief for short periods of time, from a few days to a few weeks. However, a motion in the Senedd recently noted that payday lenders charge interest rates that are ‘extremely high,’ with Simon Thomas, Plaid Cymru AM, claiming he found a £400 loan over the internet with a 4,214 APR interest rate.
Payday lenders took issue with Mr Thomas’ ire, claiming that an annualised rate of return that the payday lending industry advertises is a legal requirement, even though using an APR on a loan that seldom lasts more than a month inflates the percentage to eye-watering levels. The actual cost of repayment, experts said, is misrepresented by high APRs.
The Consumer Finance Association’s John Lamidey took issue with the suggestion payday lenders were targeting the poor. Lenders are helping people, he said, with a focus on those with variable incomes due to the weak economy, rising inflation, and rampant pay freezes.
However, Mr Thomas countered, calling payday lenders a ‘plague’ operating without due care or regulation. He called for a cap on interest rates that he referred to as ‘excessive,’ though Mr Thomas did say that payday lenders did have a role to play in the Welsh economy.