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Credit: Interest Rates

Answer

The Government strongly believes that consumers should be protected from unfair costs in the payday lending market to avoid them falling into problem debt. The Government therefore legislated to require the Financial Conduct Authority (FCA) to introduce a cap on the cost of payday loans, which came into force in 2015. In July 2017, the FCA released a Feedback Statement as part of its review of the high-cost credit market. This showed that the payday cap has been effective, leading to total savings of approximately £150 million for the 760,000 individuals using payday loans each year. Customers pay less, repay on time more often, and are less likely to need help from debt advice charities.

However, the Government recognises that some people will be struggling with their personal finances during these challenging times and may find themselves in problem debt. That is why the Government is maintaining record levels of free-to-client debt advice funding for the Money and Pensions Service in 2022/23. In addition to this, the Government launched the Breathing Space scheme in England and Wales last year. The scheme gives eligible people in problem debt who receive professional debt advice access to a 60-day period in which enforcement action is paused and most fees, charges and interest are frozen.

The Government also continues to develop the Statutory Debt Repayment Plan (SDRP), a statutory agreement that will enable a person in problem debt to combine their debts into a single repayment plan, with payments made over a manageable time period, while receiving legal protections from creditor action for the duration of their plan.

Secondary information

Type

Written question

Reference

7977

Session

2022-23

Subjects

Debts Credit Interest rates

Link

View this Written question on www.parliament.uk