Islington Council pledges to crack down on ‘pay day loans’
�Controversial “pay day” loan companies could be forced out of Islington.
Islington Council wants to pass a by-law banning businesses that offer high interest short-term loans, such as The Money Shop in Seven Sisters Road, Holloway, from operating in the borough.
The council is launching a campaign to protect people from slipping into serious debt.
Councillor Andy Hull (Labour), vice-chairman of the Islington Fairness Commission, which put forward the proposal, said: “Pay day loan companies exploit financial hardship for profit.
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“They prey on vulnerable people on low incomes – and we want to protect them from getting trapped in a debt cycle they can’t break out of.”
Pay day loan companies offer short-term loans designed to tide people over until the end of the month – and headline rates of 5,500 per cent APR are not uncommon.
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Cllr Hull admitted that the council faced an uphill struggle getting the by-law through – particularly as this kind of lending was often internet-based.
Mark Hanny, director of 24-7 Money Box, an online pay day loan company which is based in St John Street, Clerkenwell, with a headline APR of 5,500 per cent, rejected the idea that companies like his target vulnerable borrowers.
He said they were a responsible lender that is properly regulated – and raised fears that the council risks encouraging people to turn to loan sharks.
He said: “If you take the option away, the demand is not going to go away. You can only fear people will look elsewhere.”
A spokeswoman for The Money Shop, which quotes an APR of over 260 per cent, said that pay day loans are “significantly cheaper” than unauthorised overdrafts, and added: “The Money Shop is a responsible, fully regulated lender, and only offers short term lending to people in employment.
“If Islington Council were to prevent responsible pay day lenders from operating the likelihood is people would turn to illegal loan sharks.”