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NewsWCCU welcomes cap on high interest payday lenders
WCCU welcomes cap on high interest payday lenders

The biggest credit union in Wolverhampton has welcomed decisive action taken against high interest payday lenders. But Wolverhampton City Credit Union manager Matt Goulding said one unintended consequence of the move by the Financial Conduct Authority (FCA) could be to drive desperate people to doorstep lenders and loan sharks.

This month, the FCA has ruled that payday lenders cannot charge more than 0.8 per cent per day in interest and fees and must not charge more than £15 should borrowers default on their loans.

Under rules that come into force in January, borrowers will never have to pay back more than twice the value of the loan they take out with payday lenders.

Mr Goulding said: “Wolverhampton City Credit Union welcomes the decisive action being taken against high interest payday lenders. However, we're concerned that an unintended consequence might be to drive desperate people to alternatives such as doorstep lenders or worse, loan sharks.

“We urge agencies in the city to promote the ethical, low interest alternatives - credit unions. Here at Wolverhampton City Credit Union we're planning to recruit thousands more members to benefit from our fairer lending and savings products.”

The FCA itself acknowledges that the tight new rules could put an end to all but the biggest players in the payday loan industry - and lock out around 70,000 people from the payday loans market.

Mr Goulding added: “Every week we see the consequences of spiralling debt on households. But one of the risks of the new rules is that people might feel forced to take out high interest loans with doorstep lenders, even loan sharks.

“It’s now time for credit unions to step up and recruit more members, giving more people access to affordable loans. We hope all agencies in the city will help us spread the word that there is an ethical alternative to high interest lenders.”

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