Manchester Council vows to crack down on ‘scourge’ of payday loan companies in the city

Manchester Council has pledged to crack down on payday loan companies opening new shops on the city’s high streets.

A motion to tackle the “scourge” of companies offering short-term credit with “punishing” interest rates was unanimously backed by councilors on Wednesday.

Town hall bosses will now take action to prevent businesses or individuals from applying for planning permission to convert convenience stores or offices into lending stores.

READ MORE : Manchester Council withdraws controversial plans to expand Hough End leisure and build fenced grounds

Councilors have heard Manchester residents struggling with their finances, living on Universal Credit and working on zero-hours contracts have relied on payday loans or loan sharks.

Labor councilor John Hughes, who proposed the motion, said many are unable to repay their loans and are ‘pushed into a spiral of mounting debt’.

People who borrow from high-cost finance companies borrow an average of £326 a month, with interest at an annual percentage rate (APR) of up to 5,800%.

Earl Hughes told his colleagues: ‘It can lead to some people being evicted from their homes and it also affects their mental health, even leading some to take their own lives.

“It’s heartbreaking. Once they are in this devastating spiral, it becomes so much harder for them to see an end to it.

“We all know the long-term solution to payday loans has to be to raise wages, get rid of universal credit, and get the cost of living under control so people aren’t forced into their arms.

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“In the short term, more needs to be done to give our residents more information about other ways to access credit unions and debt management agencies.

“South Manchester Credit Union and Voyager Alliance Credit Union are just two in Manchester. Credit unions are open to everyone and benefit everyone.

Credit unions are community cooperatives that provide savings and loans to people with bad credit using money pooled by members.

Seconding the motion, Labor councilor Ben Clay said their services, which are also offered via mobile apps for convenience, “match the alluring ease with which operating credit can be obtained today”.

Labor councilor John Hughes, who proposed the motion, said many are unable to repay their loans and are ‘pushed into a spiral of mounting debt’.

He added: “Credit unions owned by mutuals and democratically controlled allow people to help people in social solidarity by using community savings to support loans to those in need.

“The South Manchester Credit Union has now loaned and recovered £391,000 from tenants claiming Universal Credit to help them budget.

“With a 5% failure rate, it has helped make a real difference in the lives of many people.”

The motion also received cross-party support, with Liberal Democrat adviser John Leech offering his support for a motion “to help fight the scourge of payday loan companies”.

But he also said banks need to take some responsibility for people using payday loan companies after many branches have closed in recent years.

Advisor Leech added: “The ability to build the relationship with your bank and your bank manager is gone and with it the trust that has been built between the bank and the customers.

“Is it any wonder that banks don’t want to lend money or give overdrafts to some of their customers when everything they know about their customers is on a spreadsheet?

The motion also calls for access to payday loan websites to also be blocked on Manchester council’s computer systems such as libraries and staff computers.

Information about free local debt counseling services and credit unions should then be posted in their place, the motion says.

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