Government considers interest rate cap to help poorest borrowers

Ministers are mulling the idea of capping interest rates on the high cost of credit for Britain’s worst-off.

Centre-left pressure group Compass is running a campaign to stamp out “legal loan sharking”, saying borrowing at high rates “tips customers into inescapable cycles of debt and poverty,” the Guardian reports.

“Lenders can charge any price for credit, which means some companies charge £82 for every £100 lent,” the newspaper reports Compass as saying.

“Annual interest rate charges of over 2,500% are also now common.”

The coalition government has already agreed an interest cap for store cards along with a review of credit and interest rates, but the campaign is calling for the same rules to be applied to commercial lending.

In an article for the Daily Mail, Compass General Secretary Gavin Hayes noted that such caps are already in place in Germany, France, Poland and many US states.

It is estimated that around 3 million people in the UK use doorstep loans.

source: USwitch