Labour MP slams lack of action on payday loans
Labour MP Stella Creasy has slammed the government’s refusal to act on payday loan companies as “unforgivable” after it was revealed last week that taking out the short-term loans can actually disqualify applicants from obtaining mortgages.
Mortgage lender GE Money confirmed last week that they would not consider applicants who have taken out one such loan in the past three months, nor those who have taken out two or more over the past year.
A spokesman for the firm says: “As a responsible lender in a challenging market, we review a range of data to make prudent mortgage lending decisions. Payday loan data is one of many items included in this review and if a mortgage applicant has a current or had a recent payday loan, it is unlikely that we will consider their mortgage application.”
But Creasy, who has previously chastised short-term lenders as “loan sharks” says the news that mortgage lenders are penalising borrowers who take out the loans is further evidence of the damage payday loans firms are doing to UK consumers’ financial futures.
She says: “The fact that other lenders consider use of payday loans as evidence of poor creditworthiness blows apart the myth these loans aren’t associated with exploitation of vulnerable people or causing debt to households in these difficult economic times.”
“If we had caps on the costs of credit as they do in many other countries I’m sure lenders would take a different view. With millions of people now using these loans to make ends meet and so affected by this it is yet more evidence that the Government’s refusal to act to protect British consumers is unforgivable.”
But although specialist GE has taken a firm stance on payday loans, when contacted by Mortgage Strategy the five largest mortgage lenders in the UK have ruled out automatically excluding applicants who have previously taken out payday loans.
Barclays, Nationwide, Santander, Lloyds and Royal Bank of Scotland do not currently enforce this method of screening applicants, although Nationwide confirmed that, if the credit history contained more than one of these types of loan, a manual review would be carried out. And Barclays specified that those with outstanding payday loans would still be considered for an application, as the remaining repayments would be factored into the decision process.