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Pensioner warns of payday loan perils

Campaigner whose daughter was sucked into cycle of debt urges Lords to vote to cap payday loan costs

A pensioner whose foster daughter got sucked into "an unrelenting cycle of debt" after borrowing money from payday lenders is urging members of the House of Lords to vote to cap the total cost of the loans which he claims exploit the poorest for profit.

Arthur Breens has set up an online petition calling on the Lords to amend the Financial Services Bill on 28 November to include a cap on the interest and charges applied by these lenders, who charge up to 16,000% APR. So far, more than 45,000 consumers have signed up.

The campaign has been championed by Stella Creasy, Labour MP for Walthamstow. Justin Welby, due to take over as Archbishop of Canterbury, and Baroness (Tanni) Grey-Thompson, are among high-profile peers who have agreed to back the amendment.

In July the Commons voted against a similar amendment to the bill, tabled by Creasy; the Lords amendment has cross-party support.

Breens started campaigning on payday lending after his foster daughter Karen (not her real name) borrowed money from up to eight different payday lenders to pay off debts.

Karen, aged 32, a cleaner on the minimum wage, initially borrowed just £500, which soon spiralled to £5,000 as a result of the punitive interest rates . She had also borrowed money from friends as her financial position became increasingly precarious. Breens feared the stress could even drive her to take her own life.

Breens and his wife, Judy, fostered Karen between the ages of six and 16; he said that despite being in regular work, Karen found it difficult to manage money and, with a range of personal problems, was vulnerable. Her serious debt problems first surfaced two years ago, but it was only in June this year that the Breens became aware that payday lenders were involved.

"After leaving our care she slipped into a cycle of debt that she couldn't afford to support," said Breens. "Her current job pays at the minimum wage rate, monthly and not weekly. If you are on low pay and not good at managing, being paid monthly makes things very much more difficult. Add in some depression with her domestic circumstances, a bit of alcohol, some gambling and a social environment where the culture of lending and borrowing and barely coping are the norm, and you have the perfect target for high street and internet loan companies."

Breens has been working with community organisers at Movement for Change to highlight the dangers of payday loans.

The Office of Fair Trading has extended its investigation into the way payday lenders operate after visits to the lenders' offices revealed that some were failing to adequately check whether loans were affordable for borrowers.

The Office of Fair Trading has written to all 240 payday lenders highlighting "emerging concerns" over poor practices in the market, and has opened formal investigations into several payday lenders over how they pursue borrowers who have defaulted on their repayments.

Breens said he had seen for himself the devastation payday loans can cause: "My foster daughter was a hard-working young woman but she had some problems. Once she got involved with these companies, the huge interest they charge made it almost impossible to break the unrelenting cycle of debt."

He said the Lord amendment was a key opportunity "to stop these predatory companies from exploiting vulnerable people. Myself and more than 40,000 others hope they take it.

"I know Karen should never have got into debt and I know that people should take responsibility for their actions. But at a time when it's hard for many of us to make ends meet, these companies are exploiting the very poorest just to make huge profits."

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