Politicians call for cap on interest rates

Tuesday, 17 February 2009 12:00

Politicians have called on the UK government to introduce a cap on interest rates charged by lenders amid fears the recession could drive some further into debt.

Scottish National Party (SNP) MSP David Thompson has highlighted "extortionate" 28 per cent rates on personal loans offered at HBOS.

"Rates of 22 and 28 per cent at a time when the actual interest rate is one per cent are absolutely outrageous," Mr Thompson said.

"The banks are already propped up with taxpayers cash - now they are charging them extortionate interest rates to borrow money that we are putting into the system.

"These are the kind of rates I expect from loan sharks and doorstep lenders not high street banks."

Across Europe, consumers are protected by caps on interest rates for loans, Mr Thomson said.

"This is the perfect time for the UK government to take action and protect the public," he added.

A recent report from Citizens Advice stated the UK is the only country in Europe that did not have some form of cap on interest rates.

Doorstep lenders and payday loans have the highest interest rates, with some APRs in four figures.

For an online personal loan of between £1,000 and £6,999, a Halifax Smaller Loan offers rates between 12.9 per cent APR and 28.5 per cent, depending on an applicant's circumstances, with a typical APR of 21.5 per cent.

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