Payday Loans and Credit Unions

Meeting: 
MQT on 2014-02-26
Session date: 
February 26, 2014
Reference: 
2014/0572
Question By: 
Stephen Knight
Organisation: 
Liberal Democrats
Asked Of: 
The Mayor

Question

What work are you undertaking to address problems caused by payday lending in the capital and to boost the membership of London's credit unions?

Answer

Answer for Payday Loans and Credit Unions

Answer for Payday Loans and Credit Unions

Answered By: 
The Mayor

Stephen, I am, indeed, concerned about payday loan companies in London and to charge 17,000% annual percentage rate (APR) or whatever some of these people are doing is usurious and ‑‑

 

Darren Johnson AM (Chair):  I am sorry.  I am going to adjourn the meeting.  If you can leave the public gallery, we will adjourn the meeting shortly and then we will reconvene.  Thank you.

 

[The meeting was briefly adjourned.]

 

Darren Johnson AM (Chair):  We will reconvene the meeting, and if I can ask everyone in the public gallery to remain quiet throughout the meeting.

 

If we can resume the meeting, this is the second question on the order paper today.

 

Boris Johnson (Mayor of London):  I am, indeed, worried about payday loan companies in London.  Since the crunch began and since I came in, we have been promoting debt advice services through the Know Your Rights campaign.  We have helped to promote the London Mutual Credit Union to divert people away from these usurers.  Through the Schools Excellence Fund, we are trying to develop much greater numeracy and sense of the risks these things pose.

 

I have to say that these people need to be tackled.  They could do it in the Middle Ages.  I do not see why we cannot do it now.  The Chancellor has - rightly - instructed the Financial Conduct Authority to put a cap on the cost of credit in the Financial Services (Banking Reform) Act 2013.  That should make some difference to some of these absolutely extortionate rates of usury that are being charged.

 

Stephen Knight AM:  Thank you, Mr Mayor.  Recent research from the Liverpool John Moores University found that 61% of Londoners have no savings at all, which is double the national proportion, and three quarters of Londoners would find it difficult or impossible to raise just £200 if needed in an emergency without having to borrow, so it is perhaps unsurprising that we have seen this explosion of payday lending in the capital.

 

One of the key issues, Mr Mayor, is that there is very little co-ordinated thorough research and data being published on the use of payday lending in London.  I would like to ask you whether you will work with the financial regulators to do some research and publish regular figures on the amount of payday lending taking place in the capital and, secondly, whether you would re-establish the London Debt Strategy Group, which I believe has not met since May 2011.

 

Boris Johnson (Mayor of London):  We set it up in 2009 and it was there particularly to address what was the most acute period of the recession.  I am very happy for that body to work on the issue that you raise.

 

It is true.  We do not have enough data.  There is lots of anecdotal stuff.  I was talking to people working with vulnerable people the other day and there is no question at all in my mind that the proliferation of food banks that we are seeing at the moment is partly caused by this incredible indebtedness that people get themselves into, this nightmarish cycle.

 

Stephen Knight AM:  We have seen falling real wages and of course increasing costs of living in London.

 

Boris Johnson (Mayor of London):  Indeed.  That is one of the reasons why we should all make the London Living Wage so central to what we are trying to do.  Yes, there has been a massive expansion of it, but it is going by no means far or fast enough.  I am fed up to the back teeth of listening to corporate titans suddenly coming up with some sort of elaborate weasel explanation for why they cannot do it like they have difficult business models or some such malarkey.

 

Stephen Knight AM:  I think we can all agree with you there, Mr Mayor.

 

Boris Johnson (Mayor of London):  There is no reason why more firms in London should not be paying the London Living Wage.

 

Stephen Knight AM:  Thank you very much for committing to re-establish the London Debt Strategy Group.  That is a good first step.

 

Boris Johnson (Mayor of London):  It has never been disbanded.

 

Stephen Knight AM:  Thank you for recalling it because I do not think it has been active since 2011.

 

Boris Johnson (Mayor of London):  It last met in February 2013, actually, just to correct you.

 

Stephen Knight AM:  Perhaps it has not published anything since 2011. 

 

Could I just move on to the next area of my question, which is around support for credit unions?  Obviously, with personal debt being a key issue, one of the solutions is to promote credit unions.  Devolved governments in Scotland and Wales have been putting a lot of effort into promoting credit unions.  Indeed, the UK Government is now putting money into credit unions.

 

Can you commit, Mr Mayor, to investing in the promotion of credit unions in London yourself?  I do not know whether you have read the recent reports I have published on proposals to increase and promote the use of credit unions, but I wondered whether you would consider the proposals in that report, which I believe we sent to your office, including giving every secondary school pupil a credit union account and promoting increased credit union membership and awareness across the capital.

 

Boris Johnson (Mayor of London):  Yes. Since 2010 we have helped to promote the London Mutual Credit Union alongside lots of other credit unions and they are all listed on www.londonmoney.org.uk, if anybody wants to get hold of it.  It is worth saying that actually in London, by comparison with the rest of the country, there are more credit unions in operation than elsewhere.  There are more credit unions in London than in the whole of Wales.

 

Stephen Knight AM:  There is a much lower rate of credit union membership in London than there is elsewhere in the UK and much lower than elsewhere in the developed world, so, Mr Mayor, we are a long way behind the rest of the country in terms of credit union membership.  What we really need is a big campaign in London to get people signed up and joining credit units.

 

Mr Mayor, I recently visited your local credit union in Islington, the London Capital Credit Union.  It has a membership form waiting for you.  Would you be willing to join?

 

Boris Johnson (Mayor of London):  All the credit unions in London are my local credit union.  We make no distinction.

 

Stephen Knight AM:  Mr Mayor, it is the local one to where you live.  Would you commit to joining a credit union?

 

Boris Johnson (Mayor of London):  I have no objection whatever to joining whatever.  I do not mind.  I must be impartial in this matter.  If I have to join one, I have to join all of them.  I cannot have favouritism here.

 

Darren Johnson AM (Chair):  A very quick final question from Assembly Member Knight.

 

Stephen Knight AM:  Many of us around this table have already joined a credit union, Mr Mayor, and believe in promoting the credit union sector, so I hope you will commit to joining this movement yourself.

 

Boris Johnson (Mayor of London):  Even more usefully, possibly, than that, what we can do is promote credit unions as we are doing through the website that we support campaigning for credit unions.  By the way, I fully support what the Archbishop [of Canterbury] has said about that and I look forward to the Church driving Wonga out of business, as it said it was going to do.  I have yet, by the way, to see it happening, but I look forward to seeing some action there.