There are plans to tackle the dominance of the payday loan industry, with the Chancellor of the Exchequer, Philip Hammond, announcing in the autumn Budget plans to create a no-interest loan scheme.
Hammond aims to team up with leading debt charities, lenders and banks to ensure that the no-interest loan scheme runs smoothly as possible. The Treasury has stated in the Autumn budget that a study will take place in 2019 in order to verify the feasibility of this scheme being rolled out across the country, with an initial pilot version of the scheme being created first.
Furthermore, in order to facilitate the smooth transition, the Treasury has announced that £2 million will be provided to help design the no repayment plans as a way to tackle the problem of illegal loan sharks. Grants will also be provided to technology entrepreneurs, as a way to spur them on into creating low-cost, reputable alternatives for customers against payday lenders. Mr Hammond also intends to extend the six weeks ‘breathing space’ given to customers in order to settle their debts to three months, before it will be possible for creditors to take action against them.
As previously mentioned earlier in the article, the Treasury has based this new plan on a scheme created in Australia that has been successful. Government officials highlighted that the scheme had helped four out of five who had used the no-interest loan to stop using payday lenders completely.