Abcul, the umbrella body for credit unions, has welcomed Labour plans to introduce a levy on the profits of payday lenders to support credit unions.
Ed Miliband, the leader of the Labour Party, said this morning at a visit to the London Mutual Credit Union in Peckham, south-east London, that if his party came to power it would double the public funds available for credit unions through a levy on the profits of payday lenders.
The government announced in June 2012 that it would provide about £13m a year until March 2015 to support the expansion of credit unions, which have 947,000 adult members in Britain.
"The cost of living crisis afflicting millions of Britain’s families is so bad that it is creating a personal debt crisis too," said Miliband.
"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 for people in desperate need.
"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."
Mark Lyonette, chief executive of Abcul, said his members would welcome the commitment.
"They see first hand the damage that payday lending can often do," he said. "Many have saved people from snowballing interest payments by enabling them to repay credit union loans instead, over a much more affordable period of time.
"It is the short-term nature of the loan that is the problem, not just the price of the credit, but we recognise that people value the convenience and speed of payday loans.
"That is why we want to make sure credit unions can offer speedy and convenient ways of accessing their products – both savings and loans – through new technology and partnerships with employers."
Miliband also announced that Stella Creasy, the MP for Walthamstow and recently appointed shadow minister for competition and consumer affairs, would lead Labour’s campaign against abuses by legal loan sharks, which can charge interest rates in excess of 5,000 per cent APR.
There are 385 credit unions in Britain, which hold savings of £808m and have given out loans totalling £627m, figures to the end of March show.