Manchester Council Commits to Crackdown on ‘Scourge’ of Payday Loans Companies in City

Manchester council has committed to a crackdown on payday loan companies opening new stores on high streets across the city.

A motion aimed at tackling the ‘scourge’ of firms offering short-term credit with ‘punishing’ interest rates was given unanimous support by councillors, this month. Councillors heard that Manchester residents struggling with their finances, living on Universal Credit and working on zero-hour contracts are relying on payday loans or loan sharks.

Labour councillor John Hughes, who proposed the motion, said many are unable to repay their loans and are ‘pushed into a spiral of increasing debt’. People who borrow from high-cost credit companies borrow on average £326 per month, with the interest reaching an annual percentage rate (APR) of up to 5,800 per cent.

Councillor Hughes told colleagues: “This can lead to some people becoming evicted from their homes and it also affects their mental health, even leading some to take their own lives.”

In the short term more needs to be done to give our residents more information about other ways to access credit unions and debt agencies.

“South Manchester Credit Union and Voyager Alliance Credit Union are just two in Manchester. Credit unions are open to all and are beneficial to all,” added Councillor Hughes.

Seconding the motion, Labour councillor Ben Clay said their services, which are also offered through mobile apps for added convenience, “Match the seductive ease with which exploitative credit can be obtained today. Mutually owned and democratically-controlled credit unions allow the people to help the people in social solidarity using community savings to support loans for those in need.

“South Manchester Credit Union has now lent and recovered £391,000 to tenants claiming Universal Credit to help them budget. With a default rate of five per cent, this has helped to make a real difference to many people’s lives.”

Commenting on the motion lodged, Chief Executive of South Manchester Credit Union, Sheenagh Young said: “ We are mightily encouraged that our local council has listened to us and recognises the commitment of credit unions to the financial resilience and stability of our communities throughout the pandemic and as we all re-imagine the market place for safe and affordable personal lending.”

Source – Manchester Evening News