WALTHAMSTOW: Concern over spread of 'legal loan sharks' (From East London and West Essex Guardian Series)

WALTHAMSTOW: Concern over spread of 'legal loan sharks'

9:30am Wednesday 2nd November 2011 in Your Local Areas By Daniel Binns

Walthamstow MP Stella Creasy (front left) with campaigners protesting outside the new Money Shop branch in the High Street.

CAMPAIGNERS concerned about an increase in high-interest loan firms in Walthamstow have called for restrictions on their numbers.

It comes after the opening in September of a second Money Shop branch in the High Street and the recent planning approval for an ‘Instant Cash Loans’ business, which will bring the number of lending firms in the road to seven.

Walthamstow MP Stella Creasy has been leading a high-profile campaign against what she describes as “legal loan sharks” and gathered with supporters outside the new Money Shop branch on Friday (October 28) to urge passers-by not to use the firm.

Ms Creasy wants the government to introduce a law capping the amount of interest lenders can charge.

She said the recent proliferation of lenders in Walthamstow also demonstrated the need for new legislation giving councils the power to limit their numbers in particular areas.

She said: “Twenty five people are competing for every job in Waltham Forest and we've seen a four-fold increase in people suffering from problems because of these companies.

“The Government are saying they've commissioned research into the issue which they say will be completed around the end of next year, but there's no guarantee they'll do anything and we need action now.”

The Labour backbencher, who has been urging residents to take out loans from the cheaper Waltham Forest Credit Union (WFCCU) financial cooperative instead, said she believed her campaign was making a difference.

She said: “Originally the Government wouldn't accept it was a problem and now they do, so we are making progress. But locally I also want to highlight to people in Walthamstow that they can use the credit union instead and not these companies.”

THE CUSTOMER: 'SOMETHING NEEDS TO BE DONE'

Unemployed Althea Lewis, 36, of Lynmouth Road in Walthamstow, borrowed £150 from the Money Shop but ended up having to pay a further £100 in fees and interest.

She said: “I wasn't able to pay it all back for three months and during that time they would phone me constantly demanding the money back. They would call me 10 times a day even when I said I had nothing and couldn't do anything.

“Every time the loan was extended the fees went up. It was so easy to get the money and it seemed great but I didn't know the consequences of what would happen. Even when I paid it back they were hassling me to take out another loan.

“I think it's great what the MP is doing and I agree with her something needs to be done about it. It's ridiculous.”

THE LENDERS: 'MORE COMPETITION WILL LOWER CHARGES FOR CUSTOMERS'

Frederic Nze, chief executive of Oakam, said Ms Creasy and campaigners were unfair to compare his company with firms like Wonga.com and Money Shop because less than one per cent of its business was payday loans.

But he criticised her demands for a cap on lending rates and a limit to the number of shops.

He said: “There needs to be control around how the product is designed but if we introduce a cap it will not be economical [for companies] and will drive people to illegal lenders.

“And for us, we welcome extra competition in places like Walthamstow. It makes people more competitive which reduces the rates over a longer term, it's better.”

Mr Nze also claimed that credit unions, despite their lower rates, were not a viable alternative for many in “urgent” need of a loan because of their membership processes.

He said: “[Their rates] are quite good but the way they have designed it they are excluding a lot of customers.

“Our customers know the credit union, they are informed and astute, but they hardly approve anybody [for a loan].”

He added that customers were satisfied with his firm. He said: “Our staff are receiving Christmas gifts and flowers because they are truly giving fantastic service.”

In a statement, a spokeswoman for The Money Shop said: "With the banks continuing to clamp down on lending, more and more people are turning to professional short term lenders such as The Money Shop in favour of banks and building societies.

“The borough of Waltham Forest is one of the poorest in London and is typical of a community where people sometimes need to borrow small amounts of cash to tide them over until their next pay day.

"If the Government were to impose a rate cap on the industry it could prevent responsible payday lenders such as The Money Shop from operating and the likelihood is that people would turn to illegal loan sharks which could have devastating consequences."

She added: "The Money Shop by contrast is a professional short-term lender fully regulated by the Office of Fair trading. It is a founder member of the Consumer Finance Association, abiding by its code of practice, and only offers its payday loan product to those with a bank account and with an income."

THE CREDIT UNION: 'IT SEEMS AN EASY SOLUTION BUT THEY MAKE IT WORSE'

Joy Park, director of the WFCCU, said she supported the MP's campaign and backed the call for restrictions on their numbers.

She denied that many people were turned away for loans from the union and said it was a straightforward process.

She added: “The increase in these types of places in Walthamstow is a concern. They present themselves as a reasonable solution, offering £100 loans for £120, until you have to do it every month and then can't keep up with the repayments.

“Part of it is they've companies have become more acceptable and lots of people now see it as an easy way to get over a bump in their finances, but it actually makes it worse.”

As an example, the WFCCU says people who borrow £360 from them over six months have to repay £383, whereas those who do the same with Oakam are charged £484 – representing 405 per cent in APR interest.

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