Crackdown on payday loans may boost black market, warns MP

Tim Wallace
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DRIVING payday lenders out of business could push the worst firms – and the most vulnerable clients – into illegal lending, Mark Garnier MP warned yesterday.

He fears that moves designed to stop the “more vile” lenders exploiting borrowers could also push decent firms out of business.

“The alternative to legal credit is illegal credit,” he told a ResPublica event on payday lending. “Lenders and borrowers at the murkier end of the market could be pushed into the black market, where debts are collected with a baseball bat studded with nails.”

His warnings come ahead of a consultation on capping interest rates in the market.

These changes as well as others to stop lenders rolling over loans multiple times could push 25 to 50 per cent of lenders out of business.

Garnier sits on the influential Treasury Select Committee which is investigating the regulation of financial services.