Over recent years pay day loans have become increasingly popular amongst certain consumers such as those that are on low incomes and those with poor credit ratings.

These short term loans do not generally require a credit check, and many people that need some cash to tide them over until they get paid use pay day lenders to get the cash that they need. Doorstep lenders have also become increasingly popular in the current climate, where many people cannot get the loan that they need through a traditional lender.

However, there are concerns over the interest rates that are being charged by some doorstep lenders, which can lead to low income families – often the ones that rely on these lenders – really struggling to repay the money that they owe. It has now been revealed that these lenders could face having the rates of interest that they charge curbed following proposals that are set to be discussed in the near future at Downing Street.

The Better Banking Coalition has put the package of changes forward, and the group is focussed on getting ‘fair access to credit for all’. The group comprises social enterprises, voluntary groups, and community organisations. Both doorstep and pay day lenders who focus on short term loans for those that would struggle to get money from a mainstream lender will be on the agenda with regards to curbing the rates of interest that they charge.

A spokesperson for the coalition stated: ‘In the worst case, these rates can run at 9,000% a year, and 1,000% is not unusual.’ She added: ‘Financial institutions are not lending enough to enough people and that is having a huge impact. The Government has been working on the issue of financial exclusion for many years, but we do not feel that existing measures are strong enough.’

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