THE Office of Fair Trading is investigating the scale of problem of pay day loans in the island.
Chief Minister Allan Bell revealed that the Council of Ministers would consider whether a change in law was needed to prevent pay day loan companies charging extortionate interest rates.
The issue was raised in Tynwald by Liberal Vannin leader Peter Karran MHK (Onchan) who asked, in view of the increase in pay day loans, if the Chief Minister would bring forward legislation to ‘prescribe a maximum percentage rate for loans whose repayment can be enforced through the courts’.
Mr Bell replied: ‘We are aware of the publicity on this subject currently being generated in the UK and are working with the Office of Fair Trading to assess the extent to which there is a similar problem on the island, and if so, the nature and scale of that problem. In that context, Council will make an evidence-based policy decision as to whether legislative change is required, and if so, the nature of such legislative change.’
Mr Karran asked for a time-scale for possible legislative changes and pointed out that pay day loan companies were already operating in the island. He recalled the time when the island had a big issues with loan sharks.
He said: ‘We are now going into a difficult time for a large section of our community, and this is when the likes of loan sharks and the likes of pay day loans will flourish. That is why there is a need for us to actually get on with sorting this issue out.’
John Houghton (Douglas North) suggested pay day loans were already a ‘great problem’. He said publicity was needed to warn people of the risks.
Mr Bell replied: ‘We do not have a specific timetable to work to at the moment, other than to recognise there potentially could be a problem here and that the OFT, in conjunction with council, will be working as quickly as possible to identify whether there is a problem and what sort of solution would be appropriate.’
