Crunch time for loan sharks, as MP
forces money-lending review
Stella Creasy, the Walthamstow Labour MP, is on a mission to put
a stop to legal loan sharking, she tells Randeep Ramesh
Randeep Ramesh, social affairs editor
The Guardian, Wednesday 8 December 2010
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Stella Creasy has
forced a government rethink on moneylending and high-cost credit. Photograph: David
Levene
There are few MPs like Stella Creasy. But it's not the fact that she is a 33-year-old
woman in a parliament that is predominantly filled with older men that is the first thing
her peers will mention to you. It is the fact that in just six months since she was elected a
Labour Co-operative MP, she has managed to get the government to consider curbing
rates on the high cost of credit for Britain's 3 million poorest borrowers.
This was no small feat. Although hundreds of thousands of poor people are propelled
every year into unsustainable debt as a result of being charged excessive interest rates,
the coalition government announced in the summer that it would only look at "store and
credit card interest rates" as part of its review of consumer finance.
This focus on middle-class credit rather than the more onerous kind available to poorer
people angered many – not least campaigners who had come together last year to end
"legal loan sharking". However, the push for anti-usury laws, organised by the centre-
left pressure group Compass, community organisers Citizens UK, church groups,
academics and debt advice groups received a fillip last month when Creasy got
widespread support for her 10-minute rule bill on regulating the "high-interest legal
home credit market".
Within days, the government agreed to broaden the scope of the review and raised the
prospect of regulating legal money-lending in Britain for the first time since usury laws
were repealed in the 19th century. The consultation on the review ends on Friday – and
campaigners are urging a mass mailshot to impress on ministers the need for action.
The issue of "legal loan sharking" is about "changing lives, not changing governments",
says Creasy, who learned about the horrors of debt from her time as a councillor in
Walthamstow, the area in east London she represents as an MP. Poor people would line
her offices with tales of woe: falling behind on a few hundred pounds of debt and ending
up in hock to a lender for 10 times that amount in a matter of months as late payment
penalties and exorbitant interest mounted.
Moral argument
"I have had people in tears because they borrowed for funerals or bought computers for
•2,000 because they didn't have the •500 it would have cost in Argos. It is about
protecting the poorest people and, yes, it is a moral argument," she says.
Her experience is rooted in her east London constituency where "four or five" of these
companies have sprung up on the high street in recent years. Creasy spends Fridays
leafleting their customers, and is involved with the council to stop more arriving, while
promoting credit unions – financial clubs owned and run by their members – as an
alternative to high-interest loans. "It's become a marker for poverty, having these
[lenders] on the high street," she says.
The MP says the present system allows for "superprofits at the expense of the poor". In
her sights are payday lenders, which offer short-term cash with "technical" interest rates
of up to 3,500% for a five-day loan. Then there are the hire-purchase companies that
target those on low incomes who have been refused credit and offer goods for sale on
expensive hire-purchase terms.
Creasy's fiercest fire is focused on the "doorstep" or home credit lending operators,
which charge •82 in interest and collection charges for every •100 lent and pursue
households with no full-time wage earner.
"It is a hexopoly: six lenders account for 90% of the market – with one company,
Provident, accounting for 60% – and hence little competition to drive interest rates
down. The case for government intervention is indisputable. It makes me really angry
when the chief executive of Provident [Peter Crook] says the company would see a
growth in their target audience because of the spending review's cuts."
It's worth recalling what the boss of the Bradford-based group, which charges a typical
APR of 272%, actually went on to say: "When people lose their jobs in the public sector,
they might well come to us. If they are forced to take temporary or part-time work, most
banks wouldn't want to lend to them."
The answer, says Creasy, is to follow the rest of the world by first promoting credit
unions – 40% of people in Canada are members of them, compared to just 2% in the
UK. Second, the MP says it is essential to cap the total amount of borrowing. She points
out that 15 American states have eliminated payday lending altogether either by
introducing a ban or capping the maximum charge for credit at a low level. And 14
European nations have some form of a ceiling on the cost of borrowing.
"There are lots of ideas about restricting how many times one could borrow money.
America and Canada have experimented with restricting the amount that can be lent –
both Illinois and Nevada have put in place a clear requirement that loans should not
exceed 25% of the borrower's income. I think ministers do not have to look far for
answers."
In some ways Creasy, who has a PhD in social psychology, is asking a bigger question.
As the economy grew in the last few decades, a class of people were actually becoming
worse off. Even people who were making more money were living in a way that put them
deeper in debt.
Big bang solution
But Creasy says this is not about a big bang solution. Politicians, she says, have to be
ready to be pragmatic – achieving the possible by not advocating the impossible. "I have
a duty to effect change in real time. Look, I'd love to transform the entire banking
industry. I'd love to mutualise Northern Rock and intervene in financial markets. But, as
Nye Bevan once said, that is about being pure and being impotent."
Perhaps this easy grasp of compromise comes from Creasy's early grasp of what was
practical in politics. She became politicised as a teenager by a series of single-issue
campaigns – such as the campaign to boycott Nestl‚ over its promotion of baby milk
and another to end live animal exports. Having been taken to Labour party meetings by
her father, she signed up as a party member aged 15.
"I was not a political geek," she says. "I was curious and wanted to know more. I was
also a passionate indie kid. Still am. The best thing that happened to me was when
David Gedge [lead singer of the Wedding Present] followed me on Twitter".
While her musical tastes may not be making a comeback, her Labour brand of politics is.
Although Creasy spent her 20s working as a researcher for Labour MPs, her roots lie in
community work – saving libraries, youth groups and local cinemas. She says she
supported David Miliband in the Labour leadership election in part because of his idea
of transforming local party organisations into community organisations.
Ed Miliband has taken up where his brother left off – backing the policy and trying to
reach out to local communities. "Of course Ed's right to do it. One of the challenges for
the left is that we are very good at working for people but not with them. We did not ask
how can we involve you with this."
Is she a supporter of the "big society"?
She says the problem with the Tory version is that it is a re-run of Victorian debates.
"We need to take back the idea of a big society. It's not about being against the state. The
state is an inevitable partner. You say to people you need to do everything but then take
away the funding. It's not sustainable and we found that out a century ago."
Curriculum vitae
Age 33.
Status Single.
Lives Walthamstow, east London.
Education Colchester County high school for girls, and Magdalene College, Cambridge
University. PhD from the London School of Economics in social psychology.
Career May 2010-present: MP for Walthamstow; 2008-10: head of campaigns, Scout
Association; 2006-08: deputy director, Involve thinktank; 2002-06: Labour councillor,
deputy mayor, mayor and chief whip, Waltham Forest council; 2000-06: researcher for
MPs Douglas Alexander (2002-06), Charles Clarke (2001-02) and Ross Cranston (2000
-01); 1999-2000: researcher, the Jonathan Dimbleby programme.
Interests Indie music, cinema, quizzes and American crime series.
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