Labour is claiming victory as the Government changed tack to regulate payday lenders during one of the final stages of the Financial Services bill last week.
Labour has been calling for regulators to cap the cost and duration of credit since the bill was introduced to the House of Commons in April but the Government had resisted until last week.
A Labour-led amendment proposed by Lord Mitchell and backed by Bishop Justin Welby, the next archbishop of Canterbury, meant the Government was facing defeat in the House of Lords.
Shadow Treasury financial secretary Chris Leslie says: “It shouldn’t have taken nine months since we tabled this amendment for the Government to cave in. A growing number of people from across the political spectrum have been uncomfortable with the Treasury’s stubborn refusal since March to take tougher action – so this change of heart is welcome news.”
Speaking in the Lords commercial secretary Lord Sassoon said the FCA needs to “grasp the nettle”of payday lenders.
He said: “We need to make sure it has specific powers to impose a cap on the cost of credit and ensure that the loan cannot be rolled over indefinitely should it decide, having considered the evidence, that this is the right solution.”
Lord Mitchell welcomed the Government’s moves claiming people who live in the “hellhole of gringding debt” will find their lives a little easier
He said: “Payday lenders have tried every trick in the book to keep this legislation from being approved and they have failed.”
John Charcol senior technical manager Ray Boulger says: “Payday lenders need much stronger regulation. The danger is that if you put the cap so low that it drives companies out of business it will mean that people who use those companies will either not take out loans or go underground.”