By Daniel Hunter
Labour have proposed that payday lending companies should be forced to pay a levy in order to support a local credit union in a move that will boost ethical finance in local communities.
Other plans are for councils, housing associations, rail, and bus companies to promote credit unions in a move influenced by the Community Reinvestment Act in the US.
This comes at a time when the government has rejected capping the cost of credit and thrown out a high cost credit bill by Labour's Paul Blomfield MP.
Carl Packman, author of Loan Sharks: The Rise and Rise of Payday Lending, said: “Raising a levy on payday lenders to boost support for credit unions is a stellar idea. Many customers of payday lenders would be far better served by credit unions and it's up to lenders to highlight this — though they rarely do.
“It should be noted that while it's welcome that Labour are learning from the Community Reinvestment Act in the US, the mistakes should be acknowledged, too.
“Regulators who were supposed to enforce the act were often not rigorous enough in making sure mainstream banks were working closely with community banks.
“Levies and fines for financial institutions that do not properly serve their communities should not replace tougher rules and regulations on predatory lending. These changes should work in harmony to get the best for consumers.”
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