Manchester council has pledged to fight payday loan companies opening new stores on the city’s main streets.
A motion to tackle the “scourge” of companies offering short-term loans with “punitive” interest rates received unanimous support from councilors on Wednesday.
The bosses of the town hall will now take measures to prevent companies or individuals from applying for an urban planning permit to transform convenience stores or offices into loan shops.
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Advisors have learned that Manchester residents struggling with their finances, living with universal credit and working on zero-hour contracts rely on payday loans or loan sharks.
Union adviser John Hughes, who moved the motion, said many are unable to repay their loans and are “pushed into a spiral of increasing debt”.
People who borrow from high-cost credit companies borrow an average of Â£ 326 per month, with interest rising to an annual percentage rate (APR) of up to 5,800%.
Coun Hughes told his colleagues: âThis can lead to the eviction of some people from their homes and it also affects their mental health, even leading some to commit suicide.
âIt’s heartbreaking. Once they are in this devastating spiral, it becomes so much more difficult for them to stop it.
“We all know the long-term solution to payday loans must be to raise wages, get rid of universal credit, and control the cost of living so that people aren’t forced into their hands. .
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âIn the short term, more needs to be done to give our residents more information on other ways to access credit unions and debt management agencies.
âThe South Manchester Credit Union and the Voyager Alliance Credit Union are just two in Manchester. Credit unions are open to everyone and benefit everyone.
Credit unions are community cooperatives that provide savings and loans to people with bad credit using money pooled by members.
Supporting the motion, Labor adviser Ben Clay said their services, which are also offered via mobile apps for convenience, “match the attractive ease with which operating credit can be obtained today.”
He added: âCredit unions owned by mutual societies and democratically controlled allow people to help supportive people by using community savings to support loans to those in need.
âThe South Manchester Credit Union has now loaned and recovered Â£ 391,000 from tenants claiming universal credit to help them budget.
âWith a default rate of 5%, this has made a real difference in the lives of many people. “
The motion also received all-party support, with Liberal Democrat Councilor John Leech offering his support for a motion “to help tackle the scourge of payday loan companies.”
But he also said banks need to take some responsibility for people using payday loan companies after many Main Street branches have closed in recent years.
Coun Leech added: âThe chance to build the relationship with your bank and your bank manager is gone and with it the trust that has been created between the bank and the customers.
âIs it any surprise that banks don’t want to lend money or extend overdrafts to some of their customers when everything they know about their customers is on a spreadsheet? “
The motion also calls for access to payday lending websites to also be blocked on Manchester Council computer systems, such as libraries and staff computers.
Information about free local debt counseling services and credit unions should then be displayed in their place, according to the motion.