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Fri, 14 August 2020

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Labour will clamp down on credit card debt, John McDonnell vows

Labour will clamp down on credit card debt, John McDonnell vows
2 min read

A Labour government would tackle spiralling consumer debt by capping credit card interest payments, John McDonnell will announce today.


Under the proposals, debt repayments would be limited to no more than double the original amount borrowed on a card. 

The Financial Conduct Authority, which oversees the UK's credit market, estimates that some 3 million Britons are dealing with persistent debt. 

The cap on costs would mirror the measures brought in at the beginning of 2015 to deal with the payday loan market - a measure which followed a concerted campaign from Labour MP Stella Creasy.

The Shadow Chancellor will tell his party's conference in Brighton that the last seven years of Conservative rule have created the "perfect storm" of stagnating wages and growing personal debt.

Mr McDonnell will say: “We have seen with pay day loans; some companies were making massive profits from people’s financial difficulties. Under pressure, the government has been forced to cap interest payments on payday loans.

“But more than 3 million credit card holders are trapped by their debt. They’ve paid more in interest charges and fees than their original borrowing. The Financial Conduct Authority has argued for action to be taken on credit card debt as on pay day loans.

“I am calling upon the Government to act now apply the same rules on payday loans to credit card debt. It means that no-one will ever pay more in interest than their original loan.

“If the Tories refuse to act, I can announce today that the next Labour government will amend the law. Call it the McDonnell amendment.”

Chief Secretary to the Treasury Liz Truss said the Government was already taking action to help consumers, including stopping businesses charging inflated fees for using credit cards.

“We set up the Financial Conduct Authority, which is ensuring credit card firms do more to help their customers clear debt and, from January, rip-off credit card charges will be outlawed.

“The best way to help people with their personal finances is with our balanced approach to the economy, which is creating more well paid jobs and cutting taxes for working people."

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