Govt launches research into high cost credit cap

People considering payday loans have been told that the government has commissioned research into how a cap on high cost credit could affect customers.

Consumer minister Edward Davey explained that it is imperative to have a full understanding of the repercussions of a cap on high cost lending before considering it as an option.

He explained that there are a number of potential risks involved in introducing such a limit, and said the last thing the government wants to do is make life harder for those it is trying to protect or force people to seek out loan sharks.

Consumer Focus has welcomed the research, claiming that something needs to be done to prevent customers falling into a debt trap and people need advice about how to deal with money problems.

"The number of payday loans people can take out should be limited to five a year. If someone comes back for a fifth loan it should be seen as a sign that they need independent debt advice to stop them heading into financial difficulty," said Marie Burton, financial services expert at the firm.

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2011-07-20 14:39:31 © Moneyextra.com