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Waging war on payday lenders

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COUNCIL bosses in South Tyneside are being asked to launch a crusade against high-interest rate lenders.

The move comes as the Citizens Advice Bureau in South Shields says the number of people approaching it with debts resulting from payday loans has doubled in the last two years and the average amount owed is £1,610.

A motion, to go before a full meeting of South Tyneside Council council later this week, calls for a series of measures to clampdown on lenders like Wonga, The Money Shop, Quickquid and Payday UK.

The recommendations are:

* Blocking access to loan company websites from council-owned computers.

* Issuing public warnings about the dangers of payday lenders.

* Work with partners to stop lenders locating in South Tyneside and prevent them promoting their businesses in the borough.

* Try to get licensing powers extended to limit the expansion of lenders in the borough.

* Provide debt advice to people affected by lenders.

* Promote the Bridge Community Bank in South Shields as an alternative lender.

The Money Shop, which has an outlet in Fowler Street, South Shields, offers an annual interest rate of 390.94 per cent and an annual percentage rate – the rate for a payment period, multiplied by the number of payment periods in a year – of 2,962 per cent.

Anyone taking out a £200 loan would face repaying – in a single payment, within 28 days – £259.98.

Coun Allan West, the council’s lead member for adult social care and support services, is a signatary to the motion, and says he is concerned that the most vulnerable people in the borough are falling foul of the lenders.

He said: “It is easy to understand the financial pressures that lead people to rely on payday lenders, but their excessive interest rates mean there is a real risk of a short-term financial issue turning into a long-term spiral of increasing debt and interest payments. A national cap on the cost of lending would go a long way towards protecting some of our most vulnerable citizens from the dangers of payday lending.”

He added: “In the meantime there is a lot we can do locally, by letting people know about options like The Bridges Community Bank, which offers much lower rates, as well as keeping money in the local economy.

“I would encourage anyone who has financial problems or concerns about the Government’s changes to the welfare system to contact the council’s welfare rights service on 424 6040.”

The full council meets at South Shields Town Hall at 6pm on Thursday.

Twitter:@shieldsgazpaul

PAYDAY lending firms have become a major political issue in recent years.

Many councils already block access to lenders’ websites from libraries and other public buildings and South Shields MP Emma Lewell-Buck, last year, signed a national charter – supported by some of Britain’s biggest debt, consumer and anti-poverty organisations, including Which?, Citizens Advice, StepChange Debt Charity and Church Action on Poverty – calling for tougher regulation of payday lenders.

In October 2012, Newcastle United sparked a storm when the club announced a four-year sponsorship deal with Wonga.com.

The payday loan company now has its name on the club’s shirts.

Wansbeck MP Ian Lavery labelled the company “morally bankrupt” on social networking site Twitter.

Before the start of this season, the club’s star striker, Papiss Cisse, said he would not wear the club shirt bearing a Wonga logo on religious grounds, but the row was resolved in time for the club’s warm-up match against St Mirren.

 

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