Chuka Umunna, Member of Parliament for Streatham, has co-launched a campaign to stop loan sharks this week as a signatory to the End Legal Loan Sharking coalition.
In the Streatham constituency there exist high street lenders charging rates as high as 400% APR despite the Bank of England base rate having remained at just 0.5% since March 2009.
Mr Umunna was signatory to a letter published in The Guardian this week alongside academics, campaigners and other MPs calling on the government to introduce interest rate caps and increase access to affordable consumer credit.
The campaign cites strong evidence that interest rates which companies charge on short-term loans are not subject to competitive pressures because of a lack of alternative sources of credit and borrowers’ urgent need for ready cash.
Local organisations such as the London Mutual Credit Union which serves Lambeth and Southwark and of which Mr Umunna is a member, provide an alternative to loan sharks by lending small amounts of money while encouraging people to save.
Although the government has said it will regulate excessive interest rates on credit and store cards, it is not taking steps to regulate interest rates charged by lenders which most major European countries already do including France, Finland, Germany, Greece, Holland, and Italy.
Mr Umunna, who is a member of the Treasury Select Committee, is also joining the call for all retail banks to be legally obliged to provide people with a bank account and other financial services.
Mr Umunna said:
“Irresponsible lenders prey on vulnerable people in difficult financial situations, trapping them in cycles of debt through extortionate interest rates, and this is why we are calling on the government to cap the interest rates which consumers are charged on short-term loans.
“It is a scandal that there are predatory lenders on our doorstep here in Streatham charging such exorbitant rates of interest.
“London Mutual Credit Union is a great example of the kind of initiatives which the government should be supporting – increasing access to credit and helping people put savings aside.”