Successive UK Governments have failed to act to prevent the poorest borrowers from being exploited. In 1927, there was a law which allowed courts to assume that any moneylending agreement costing more than 48% was 'unconscionable' and which gave judges the power to cancel the loan. However, this was not well used by low income borrowers who were often reluctant to go to court.

In 1974, the modern Consumer Credit Act got rid of the 'presumptive' rate of 48% and allowed the courts to re-write agreements if they felt that they were 'extortionate'. Again, this law was not well used and the few cases that did reach the courts revealed that judges were not often willing to intervene on the side of the borrower.

In 1991, the Office of Fair Trading reviewed matters, and reported that the extortionate credit provisions of the 1974 Act were ineffective. Government took no action.

In 1999, Debt on our Doorstep successfully pressed for this OFT report to be re-referred to the Department of Trade & Industry and for a new review to take place.

In 2003, the DTI finally published new proposals - refusing to implement a cap on credit prices but proposing a new court based test to change the criteria for judges to intervene from 'extortionate' to 'unfair'. The changes were brought in by the Consumer Credit Act 2006.

However, in an answer to a Parliamentary Question earlier this year the Ministry of Justice confirmed that no monitoring of the effectiveness or otherwise of the 'unfair credit' provisions is taking place. From what we can gather, this change in the law has been completely ineffective.

Other measures have also failed. In 2006, following action by Debt on our Doorstep, the Competition Commission agreed with us that there was a 'striking' lack of price competition in the home credit or door to door lending market. This was allowing lenders to obtain over £75 million per year in excess charges. However, the Commission rejected our calls for a price cap, arguing that this would not address the 'underlying' causes of the lack of competition. Instead it put in place a number of other 'remedies', including better information for borrowers and sharing of customer data, and also established a price comparison website. None of these have made any difference.

In 2006, Provident Financial, the largest home credit lender was charging borrowers £65 for every £100 they borrowed. Today, they are charging £82 per £100. A 26% increase in the three years since the Competition Commission's report.

Other forms of high cost credit are also expanding. The Payday lending industry was originally developed in the US, where it has recently come under enormous scrutiny and criticism. The Bush Administration placed a cap on the amount that payday lenders could charge US military personnel after it was revealed that they were deliberately targeting US barracks for their loans. A typical payday loan charges between £20 and £35 per £100 borrowed, but this rises if the loan is 'rolled over' from one month to the next. Because of the way that people become trapped in a cycle of increased borrowing, there have been moves in many states in the US to limit the number of roll over loans and they have sought to provide a 36% APR cap for all people not just the military. The Obama Administration is now committed to a federal cap on payday loans.

But here in the UK, Government is failing to act with conviction. Following Debt on our Doorstep's paper on the position of low income borrowers in the current crisis, the Office of Fair Trading is reviewing all forms of high cost credit markets. That is welcome, but the reality is they don't have the powers to make an immediate difference. Government needs to pass legislation that gives them the power to implement a cap if they find that low income borrowers are being exploited.

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