Page last updated at 14:00 GMT, Wednesday, 3 November 2010

Ministers urged to ban 'legal loan sharks'

The government has been urged to take a stand against "legal loan sharks" offering short-term credit at high interest rates.

Labour's Stella Creasy said ministers should cap the total cost of borrowing that could be charged on loans.

On 3 November 2010, she told the Commons: "Loan sharks are now circling Britain's poorest families watching them struggle financially and sensing a business opportunity."

The MP for Walthamstow said the government's economic plans contained in the Budget and Spending Review had boosted the share prices of credit providers.

She continued: "These are companies that make money by locking people into cycles of debt, with interest rates starting at around 272% and rising up to 2,500% or more.

"Miss a payment by a day and you incur a charge on which interest is added. Then there are the administration fees and fines, on which more interest is added.

"This debt doesn't just destroy bank balances, it destroys the lives of those who live with the fear of the bailiff or the panic of repossession hanging over their families."

Her Consumer Credit (Regulation and Advice) Bill would give the government power to regulate interest rates that were charged on different products.

The bill would also impose a levy on providers which would finance debt counselling and advice.

It was given an unopposed first reading but stands little chance of becoming law without government support.

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