Rebecca Taylor, one of the Liberal Democrats’ two Euro MPs for Yorkshire and Humber, said an interest rate cap should be introduced along continental lines to address concerns that lenders are exploiting people and ensure a “better deal for consumers”.
But she ruled out banning payday loans altogether, describing some lenders as “legitimate” – and warning that the alternative for many “desperate” people would be to use “illegal loan sharks”.
“A number of European countries have restrictions on interest rates, sometimes called a cap or a maximum rate,” she said.
“The level at which this maximum is set can vary tremendously – from 20 per cent in France, to 400 per cent in Slovenia.”
Getting the balance right, she added, was essential.
“Set the maximum rate too high, and you might as well not bother,” she said. “But set it too low, and you might see legitimate payday lenders exit the market – and leave consumers with no choice but to go to illegal loan sharks.”