Off the Fence with East Hampshire MP Damnian Hinds

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COMMENT: Funding PTSD programme could end up saving money

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Over the past decade, payday lenders have sprung up in towns and cities across the country.

The financial crisis of 2008 meant more people turning to high-cost credit; but the sector had been big (and growing) for a long time beforehand.

But with APRs in some instances stretching to more than 4,000 per cent, it’s fair to say that certain lenders were taking advantage of those who needed funds quickly.

I have been campaigning on issues surrounding the ease and speed with which individuals can access high-cost credit since before I became an MP, and was a keen supporter of last year’s cross-party Charter to Stop the Payday Loans Rip-Off.

So I am very pleased by the Financial Conduct Authority’s recent announcement that payday loans will be capped at 0.8 per cent of the amount borrowed a day, and that in total no-one will have to pay back more than twice what they borrowed.

This should help to prevent those who borrow from payday lenders from spiralling into debt if they cannot afford repayments.

However, we must be careful: those who wanted credit before will still want credit, and it is vital that they have access to responsible lenders so that they do not turn to the worst alternatives, such as loan sharks. Credit unions are a good example of relatively low-interest sources of credit, with the added benefit of being not-for-profit local institutions.

Hampshire’s local credit union is United Savings and Loans, based in Portsmouth. It has thousands of active members and is owned and run by its members, with no external shareholders to be paid dividends and a voluntary board of directors. Therefore, all operating profit goes straight back to its members.

The government has been working to expand and modernise the credit union sector, and I hope more people choose to become members of their local credit union – both in order to have access to credit and to take advantage of the savings options on offer.