Labour will slap a levy on payday lenders to fund credit union boom - Miliband (From The Northern Echo)
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Labour will slap a levy on payday lenders to fund credit union boom - Miliband
LABOUR will slap a levy on payday lenders to fund a boom in responsible credit unions, Ed Miliband will pledge today.
The party leader will unveil plans to raise millions of pounds from firms blamed for reckless loans that are plunging poorer households into a deadly "debt spiral".
The money would be used to double the current Government funding - 13m a year - for credit unions, which offer loans and financial advice on a not-for-profit basis.
The move follows rising alarm over an explosion in the number of high-interest lenders and criticism that they exploit vulnerable people with nowhere else to turn for credit.
Online payday loan deals can be completed in under an hour. In one notorious example, 250 borrowed for 14 days would see 290.78 repaid - at an annual rate of 4,214 per cent.
The North-East is a hotspot for payday lending, prompting The Northern Echo to offer free advertising to every credit union in the region.
Now Mr Miliband will vow to introduce the levy, saying: "The cost of living crisis afflicting millions of Britain's families is so bad that it is creating a personal debt crisis too.
"We must protect the most vulnerable people in our society from the worst of exploitation by payday lenders.
"And it is right that the companies that benefit from people's financial plight accept their responsibilities to help ensure affordable credit is available."
Labour has already announced plans to cap payday lenders - a move rejected by the Coalition - and give local authorities new powers to limit the number on High Streets.
The latest policy was welcomed by Jenny Chapman, who has campaigned for a crackdown on high-interest lenders in her Darlington constituency.
The Labour MP said: "It's a David and Goliath contest, so this is just what we need.
"Our credit unions don't stand a chance of competing without better advertising and instant access. This extra money will make a huge difference."
Yesterday, David Cameron strongly defended his Government's curbs on lenders, pointing to recent proposals from the new Financial Conduct Authority.
He told MPs: "They include proposals to use powers to ban loans and advertisements of which it does not approve, to ensure that lenders cannot roll over loans more than twice and to limit the number of attempts that a payday lender can make to take money out of accounts."
Mr Cameron insisted a cap was still possible, but added: "We must bear in mind what has been established in other countries, and by our own research, about whether a cap would prove effective."
On a visit to a credit union in London, Mr Miliband will commit Labour to hike the levies to be paid by lenders to the FCA, when it takes over regulation next year.
He will warn that up to five million families will borrow money from payday lenders in the next six months, in a market now worth 2.2bn.
And more than 1.5m households are spending more than 30 per cent of their income on unsecured credit repayments, Mr Miliband will say.
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