Britain's opposition party pledges levy on payday lenders
LONDON Oct 17 (Reuters) - British opposition leader Ed Miliband said on Thursday he would impose a levy on the payday lending industry if his party won the next election in 2015, accusing some lenders of exploiting vulnerable parts of society.
Demand for short-term, high-interest loans to tide workers over until payday has boomed in Britain, Europe and the United States as banks have pulled back from risky lending following the 2008 financial crisis.
But the high interest rates, over 5,000 percent annually on some loans in the UK, have been blamed for trapping customers in debt, prompting the government to assign regulation of the industry to the Financial Conduct Authority from April next year.
Miliband's Labour party, currently ahead in opinion polls, is seeking to use the issue to bolster his campaign, which has so far centred on a fight against rising living costs.
"We must protect the most vulnerable people in our society from the worst of exploitation by payday lenders," Miliband was expected to say when announcing the election pledge.
"We would cap the cost of credit, halt the spread of payday lenders on our high streets and force them to fund the credit unions that can offer a real alternative."
The British payday loan industry is estimated to have doubled in size in the three years to 2011/12, to a level of around 2.2 billion pounds ($3.5 billion) in outstanding loans.
Credit Unions are non-profit cooperatives, owned by local communities, which provide financial services such as current accounts, savings and loans.
Labour said it had yet to determine the levy rate, but intended to double the current government support for credit unions, which it estimated to be worth around 13 million pounds per year.
On Wednesday, Prime Minister David Cameron said he was considering imposing a cap on the interest rates that payday lenders were allowed to charge.
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