Dear John,

In the run up to the financial crash and crisis of 2008, personal debt was skyrocketing and households owed extraordinary sums of money in outstanding debts. These are both worrying trends that are repeating themselves now.  According to the Trade Union Congress, the level of unsecured debt as a share of household income is now 30.4%, the highest level it has ever been - and well above the £286 billion peak of 2008. The Financial Conduct Authority’s plans to cap the prices charged on rent-to-own goods and, more recently, to re-shape the overdraft market, are steps in the right direction when it comes to managing the problem, but I am writing to asking you to go further to end the debt trap.

As you will know, the household debt trap for people on low incomes is not caused by people being indebted to a single lender—it results from a system of ‘risk-based pricing.’ This incentivises lenders to target people they know will struggle to repay, structuring their products in ways which levy high default fees or encourage continual refinancing. The most vulnerable people are forced to take on loans to pay down existing debts and become stuck in a vicious cycle of misery, stress, and increasing financial hardship.

This is a systemic problem that can only be solved by extending a payday loans and rent-to-own style cap across the whole sector. According to the End the Debt Trap campaign, such an extension would result in savings for households of at least £6 billion per year. These savings would enable people to build up their financial resilience against future income and expenditure shocks, and, because many indebted households are geographically concentrated, also provide a boost to economies in deprived areas.

The current personal debt burden is unsustainable and it poses a risk to our national economy as well as the individuals caught in the debt trap.  I strongly urge you to extend the costs cap all forms of consumer credit.  For more details please read this briefing from the End the Debt Trap campaign: https://neweconomics.org/uploads/files/end-the-debt.pdf

The urgent and growing nature of the personal debt crisis requires all parties to work together to find a solution, and with this in mind, I look forward to your positive response.

Yours sincerely,