The investigation into the instant cash loan industry as announced by the OFT has been welcomed by one industry body that has had misgivings about the high interest rates charged by providers of short term loans, experts say.
The Association of Christian Financial Advisers has expressed its concerns that some disreputable payday advance lenders have been preying upon Brits in financial distress and extending credit to borrowers that may not be able to repay the loans easily. In a letter to Chancellor George Osborne that the ACFA sent this past December, the industry body called for an interest rate cap on payday lending on the grounds that these rogue lenders are operating unchecked and possibly endangering the financial health of the country.
The interest rates lenders charge are both unreasonable and unfair, according to the letter, with the ACFA comparing the industry to back street loan sharks masquerading as high street shops. The industry body has fears that too many consumers are using payday lending in an unsustainable manner, allowing loans to roll over month after month and accruing unmanageable levels of debt.
The ACFA called upon the Chancellor to cap interest rates on not just payday lending but all forms of personal lending, campaigning for legislation that would apply to things such as unauthorised overdrafts. The Association seeks the adoption of a scheme similar to the one binding credit unions, which must cap maximum interest at a static rate above the nation’s base rate.
Aidan Vaughan, chairman of the ACFA, applauded the recently announced investigation of the payday lending industry through the OFT, remarking that the extortion of the vulnerable and the desperate needed to end.