Payday lending is nothing if not controversial, topical and on politicians’ radars.

Rightly, there has been a flurry of announcements to reform the industry and ultimately protect the most vulnerable consumers.

Payday lending started in the United States as a result of a backlash against the social ills caused by illegal loan sharks and the failure of traditional banks to offer shorter, more flexible loans. It existed because there was a demand for it – and there still is today.

Try walking into your bank and asking to borrow £100 for three days to pay the car mechanic ahead of your payday. Banks are reluctant; they are set up to lend money for years, not days. If you slip into using an unauthorised overdraft, eye-watering charges of 80,000 per cent APR are not uncommon.

Yet often this demand has been exploited by some unscrupulous payday lenders, and, rightly, this needs to be stamped out.

Last week the FCA made a series of proposals, including using powers to ban loans and advertisements of which it disapproves, 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.

In response, I have been pivotal in working with key cross-party MPs led by Paul Bloomfield MP to go further to end ‘rip-off’ tactics in the industry. Swathes of MPs, the leading debt charities and key consumer groups have all signed up.

In our charter we want regulation to:

  • stop them giving loans to people who can’t realistically afford to pay them back
  • stop them repeatedly rolling over loans and creating spiralling debt
  • stop hidden or excessive charges
  • stop them raiding borrowers’ bank accounts without their knowledge and leaving them in hardship
  • stop irresponsible advertising and instead provide clear and transparent information
  • require lenders to promote free and independent debt advice
  • ensure they co-operate with other services to help people get out of debt.

During the FCA’s consultations we are urging people to sign up to support our campaign, www.change.org/payday loancharter

A day later, Labour proposed a ‘Wonga tax’ on payday lenders to help fund credit unions. A commendable idea, but ultimately this cost would be passed on to the consumer, often vulnerable consumers in distress least able to pay extra. Far better to increase the licence fee required to be a payday lender.

At present it is a frankly pathetic £2,000, no barrier to unscrupulous loan sharks entering the market. Money raised should be given to debt charities who can help those in financial distress.

We have a duty to protect consumers and I will push for our charter to be adopted by the FCA in full.