Payday lenders branded 'vultures'

Updated: 

David MilibandPhil Noble/PA Archive/Press Association Images

Companies which charge massive interest rates for payday loans have been branded "vultures" by David Miliband.

The former Labour leadership candidate was speaking after hearing Labour MP and anti-loan shark campaigner Stella Creasy condemn football clubs Blackpool and Hearts and Ant & Dec's Red or Black for accepting sponsorship from loan firm Wonga.

Mr Miliband said that he regarded it as "totally shocking" that firms were demanding four-figure interest rates from people struggling to make ends meet.

After listening to Ms Creasy's comments at a meeting of the Movement For Change organisation on the fringe of Labour's Manchester conference, Mr Miliband said: "Two things are totally shocking to me.

"First, 75% of payday loans are taken out to pay off other payday loans, so you are stuck in this chronic circle from 1,000% interest rates becoming 5,000% interest rates becoming 10,000% interest rates.

"Secondly, why is this becoming an issue now? There are two reasons. One - because the country has been in recession, a double-dip recession. There is real hurt.

"But there is another reason. These are in the main American companies.

"I like inward investment into Britain, but not from companies coming here because states in America have put a legal limit on the interest rate.

"As states in America have put a legal limit on interest rates, the companies have had to look elsewhere and they are coming like vultures, frankly, into the UK because they can see a captive market - four million loans.

"Our credit unions are being outgunned by big business companies coming from the US where they are being stopped from doing their trade and they are doing it here and they are preying on our people."

© 2012 Press Association

SPONSORED FINANCIAL CONTENT