Payday lenders targeted in Labour offensive

Miliband accuses lenders of ‘engulfing’ people in debt

Ed Miliband: “Too many councils are finding they don’t have the real power to stand up for local people” (Charlie Forgham-Bailey)

An overhaul of planning laws to prevent payday lenders, pawnbrokers, bookmakers and fast-food outlets from swamping high streets will be pledged by Labour today.

Payday lenders are taking advantage of the retail crisis to open businesses in town centres, tempting the unemployed and low-paid with loans at extortionate interest rates, Ed Miliband will warn.

The Labour leader will claim that the most unscrupulous loan sharks are trapping borrowers with annual interest rates of more than 1,000 per cent. The number of payday loan firms operating on high streets leapt by 20 per cent last year, while the presence of betting shops and pawnbrokers also increased. Under his plans, councils would get the power to intervene if they believed too many businesses of the same kind were setting up in one area.

The problem includes fast-food outlets but has been particularly acute with the rapid spread of payday lenders whose critics accuse them of increasing levels of debt in the areas where they operate. Critics also claim they deter other retailers from opening stores and put people off shopping in the area.

In unveiling his plans to close a planning loophole Mr Miliband will cite the experience of Chatham in Kent where 23 lenders operate within a mile of its high street. Opponents say their heavy presence is driving up levels of debt in the town.

Launching Labour’s local election campaign, Mr Miliband will say: “Today our high streets are changing and often not for the better. Take an example. One of the fastest-growing businesses on the high street is the payday lenders, sometimes charging extortionate rates of interest. In hard times it is no wonder people turn to them. But often they just engulf people in debts that they cannot pay, interest rates of over 1,000 per cent.”

The Government has faced demands from MPs to take action to rein in companies offering high-cost, short-term cash advances to the vulnerable.

The Independent has campaigned for a crackdown on lenders accused of preying on low-paid workers and benefit claimants and “rolling over” loans never likely to be paid back. Last month the Office of Fair Trading accused payday lenders of causing “misery and hardship” for many borrowers because of irresponsible and unlawful lending practices. It said many companies relied on a high proportion of their customers failing to repay their original loan in full and on time. About 15 per cent of high street stores stand empty due to the economic downturn, the continuing increase in online trading and competition from out-of-town shopping centres. The void is being partly filled by businesses that thrive in hard times, like payday lenders.

Mr Miliband will argue that part of the problem is the inability of local authorities to intervene when loan companies apply to move into an empty bank or building society – even if another lender is already operating next door – because it does not amount to a change of use. He will commit an incoming Labour government to giving new power to councils to decide “what shops can and cannot open up” depending on the local demand.

“It means that when they want, the people in our towns and cities can say: ‘No. Enough is enough’,” he will say.

Mr Miliband added: “Too many councils are finding that they don’t have the real power to stand up for local people. But that is what politics is supposed to be about: standing up for those without power and giving power to them.

“Currently if a bank branch closes down, there’s nothing a council can do if a payday loan shop wants to move in and open up in the same place. Even if there’s another lender next door. That can’t be right.”

After his launch speech in Ipswich, Mr Miliband will travel to Cambridge and Stevenage as he tours 10 towns and cities at the start of Labour’s campaign.

Nick Clegg, the Deputy Prime Minister, will travel to Cornwall to launch the Liberal Democrat campaign. He will turn his fire on his Conservative coalition partners, accusing them of being as guilty as Labour of squandering taxpayers’ money on “vanity projects”. Mr Clegg will claim that both have a record in local government of waste.