Call for £450m levy on payday loans industry

A £450 million levy on the consumer credit industry should be used to create a "new generation" of affordable lenders to take on Britain's legal loan sharks, leading think tank IPPR has said.

Britain needs 'capital injection' to tackle payday loans

The UK needs a "capital injection" to tackle the reliance on payday loans, a think tank has said.

Mat Lawrence, one of the report's authors, said the payday loan industry had grown "in large part" to lend to households High Street banks had been unwilling to give credit to.

The payday lending industry has grown in large part because of a gap in the credit market that mainstream banks are unwilling to fill.

Regulation can reduce the harm done by payday lenders but it alone cannot ensure that the public interest is properly served in the provision of affordable credit.

Britain needs an initial capital injection to expand the provision of affordable credit and new 'match saving' incentives for people on low incomes to enable people to build up a stronger asset base of their own and reduce their reliance on credit.

– Mat Lawrence

Call for one off levy on payday loans companies

A £450 million one-off levy on the payday loans industry should be used to create a "new generation" of affordable lenders to take on Britain's legal loan sharks, a leading think tank has said.

Read: Miliband's payday loans attack

Wonga
Eight million people use the payday loans industry annually, figures show. Credit: PA

Read: Payday lender employee may be behind MP Twitter smear

A report by the Institute for Public Policy Research (IPPR) called for a levy to be used to compensate for the "direct financial harm" caused by the £180 billion consumer credit market.

Revenue from the levy would then be used to mobilise not-for-profit institutions to compete with firms such as Wonga, Quick Quid and Payday Express.

Not-for-profits and credit unions could be hosted by the Post Office, and lend "small amounts at affordable rates to ordinary people", the report said.

UK households collectively owe nearly £160 billion in unsecured consumer credit, with low-income households "vulnerable to exploitation by unscrupulous firms".

Read: Clampdown on payday loans

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