Manchester City Council has committed to cracking down on payday loan companies opening new stores on the city’s main streets.
A motion aimed at combating the “scourge” of companies offering short-term loans with “penalty interest” was unanimously supported by city councils on Wednesday.
City councilors will now take steps to prevent businesses or individuals from applying for building permits to convert convenience stores or offices into credit operations.
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City councils heard that financially struggling Manchester residents live on universal loans and work on zero-hour contracts, rely on payday loans or loan sharks.
Labor councilor John Hughes, who proposed the motion, said many were unable to repay their loans and were “being pushed into a spiral of rising debt.”
People who borrow from expensive lending companies borrow an average of £ 326 a month, with interest rates reaching an annual percentage rate (APR) of up to 5,800 percent.
Coun Hughes told his colleagues, “This can cause some people to be evicted from their homes, and it also affects their mental health and even leads to some suicide.
“It’s heartbreaking. Once they find themselves in this devastating spiral, it becomes so much harder for them to see an end.
“We all know that the long-term solution to payday loans must be to raise wages, get rid of universal credit, and control the cost of living so people aren’t forced into their arms.
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“In the short term, more needs to be done to provide our residents with more information about other ways to access credit unions and debtor offices.
“The South Manchester Credit Union and the Voyager Alliance Credit Union are just two in Manchester. Credit unions are open to everyone and are beneficial to everyone. “
Credit unions are community cooperatives that provide savings and loans to people with poor credit ratings with money pooled by members.
Labor Councilor Ben Clay backed the motion, saying their services, which are also offered through mobile apps for added convenience, “match the seductive ease with which exploitative credit can be obtained today”.
He added, “Joint and democratically controlled credit unions enable people to help people in social solidarity by using communal savings to support loans for those in need.
“South Manchester Credit Union has now loaned and reclaimed £ 391,000 to tenants who are using universal credit to help them with budget planning.
“With a failure rate of five percent, this has helped to really change the lives of many people.”
The motion also received bipartisan support, with Liberal Democratic Councilor John Leech offering support for a motion “to help fight the scourge of payday loan companies.”
However, he also claimed that after many branches have been closed in recent years, banks have had some responsibility for the people using payday lending companies.
Coun Leech added, “The chance to develop the relationship with your bank and your bank manager has gone, and with it the trust that has been built between the bank and clients.
“Is it surprising that banks refuse to lend money or overdraft to some of their customers when everything they know about their customers is in a spreadsheet?”
The application also calls for access to payday loan websites including Manchester City Council IT systems such as libraries and personal computers to be blocked.
Information about free local debt counseling centers and credit unions should then be displayed in their place, according to the application.