City Hall’s Liberal Democrat group have called on Mayor Boris Johnson to promote responsible lending and drive out “loan sharks” and payday lenders.
London Assembly Member Stephen Knight wants Mr Johnson to promote and support credit unions as an alternative to payday lenders who trap borrowers in “a cycle of unsustainable debt” through “exorbitant interest rates”.
In a report published today, Mr Knight calls on the Mayor to open a credit union savings account for every secondary school starter and support changes to planning rules to make it harder to open payday loan shops on the high street.
Mr Knight said: “It is a harsh fact that where credit exclusion is greatest, payday companies and illegal loan sharks thrive. “Borrowing is a reality of life for many people on a low income, but if people have no access to credit at low interest rates they are often driven into the hands of loan sharks.
“Despite Londoners having such an immense need for affordable lending the reach of credit unions is far less than in many other cities. At present just one per cent of the London population belong to a credit union, compared to 3% in Merseyside and 5% in Glasgow.”
“It is high time the Mayor understood and monitored the problems caused by payday lending in the capital and invested in and promoted credit unions so as to curb the growth in payday lending and to drive out loan sharks from London.”
In 2010 Mr Johnson came under fire after agreeing a deal for high interest lender Wonga to sponsor the capital’s free New Year’s Eve travel. He later criticised the lender’s “extortionate” debt fees and cautioned against getting into “irrational and unwise debt”.