Islwyn MP Chris Evans has called on the UK Government to do more to regulate payday loan companies labelling them “loan sharks”.
Speaking in a House of Commons debate on Thursday, Mr Evans said: “I grew up in the South Wales valleys where doorstep lenders were as much a feature of the towns and villages there as was the coal slag heaps from the mining industry.
“While, the valleys have changed much and are now green and beautiful one thing has not – the loan shark whether legal or illegal is still a regular visitor to the terrace streets.
“Despite the heavy campaigning from members on all sides of the house there are still constituents of mine trapping in the appalling cycle of debt.”
Mr Evans told fellow MPs how a constituent of his got in trouble with some payday lenders.
He said: “Upon being granted this debate a constituent wrote to me about the problems he has faced with short-term lenders.
“When we met he told me how pay day loan companies added a whole range of admin charges, interest rates and fees on top of his initial loans.
“In an attempt to pay back some of the money he borrowed he fell further and further into debt as he took out loan after loan.
“He borrowed £400 off Wonga and now has to pay back £739 – if he could not afford the initial £400 how is he going to afford the £739?
“Where is the logic in that? It really baffles me that payday loan companies seem to think the answer to somebody being unable to pay back a loan is to take out another one.
“With Wonga breathing down his neck he was forced to borrow £100 off Quick Quid. Now he owes them £201.
“He tells me at no stage was he asked about his income or expenditure when he took out the initial loan.”
Mr Evans said he was frustrated at the speed at which the Government was investigating the lenders and called for more action to support credit unions.
He added: “Aside from a more regulated industry the alternative to high cost credit is a financial services sector which contains a wider array of ethical and enlightened products and services.
“Credit unions rightly receive support from all sides of the House.
However, for them to flourish they need the support and help of government – if that means regulating the high cost credit industry while at the same time restricting their advertising budgets, as has been done in other industries, then so be it.”