POLITICS
22/05/2012 16:25 BST | Updated 23/05/2012 02:27 BST

Attempts To Cap Pay Day Loans Defeated In Commons

An attempt to clamp down on the cost of borrowing from pay day lenders has been defeated in the Commons.

MPs voted by 266 to 225, majority 41, to reject Labour MP Stella Creasy's attempt to allow the authorities to cap the total cost of credit.

Walthamstow MP Ms Creasy had previously warned the UK was becoming a nation of "zombie debtors", only paying interest on loans and never reducing their debts.

Outlining her proposals to the Commons last month she said pay day lenders were "exploding across our towns and our cities", the Press Association reported.

She said "struggling" families were borrowing money to meet their daily needs and that the levels of debt would only increase as "there is no end in sight to the financial pressures they face".

Her amendment was tabled at report stage of the Financial Services Bill. She added: "I believe that we do need total cost caps on credit charges so that consumers have an explicit amount beyond which the cost of any loan would never go, interests rates, admin charges and late repayment fees included."

Ms Creasy said the creation of the Financial Conduct Authority (FCA), as part of the government's planned restructure of the UK's financial regulatory framework, presented an opportunity to "take action as quickly as possible and prevent the problems that we've already seen in our communities from these loans becoming worse".

Ms Creasy has campaigned on the issue, linking it to the plight of EastEnders character Bianca Jackson who found herself struggling with debt.

She told ministers further action would "win the gratitude of the fans of EastEnders watching these problems unfolding on their screens".

Her amendment was defeated today following a debate on it last month, during which Treasury Financial Secretary Mark Hoban said: "There are significant risks to specifying in great detail on the face of the Bill the precise type of rules the FCA may make."

But he added: "What this government has done, following debates on this matter, (is) to commission research to look at the impact of a cap on the total cost of credit. I think we should look at the research and understand what remedies are proposed and follow that through."