Osborne announces consumer credit levy to fund anti-loan shark operations

A levy will be introduced on consumer credit firms to pay for teams to chase loan sharks, the Chancellor has said.

George Osborne said that since 2004 these teams have prosecuted more than 300 illegal money lenders, written off over £50 million of illegal debt and helped more than 20,000 consumers.

In December, the Chancellor said the Government was weighing up imposing a levy on the industry to meet the funding needs of Illegal Money Lending Teams.

The Treasury said the move "will ensure that the perimeter of the consumer credit market continues to be enforced and vulnerable consumers remain protected from loan sharks".

The measure comes after new rules on payday lenders capping the amount firms could charge at 0.8% per day came into force in January last year.

These rules, enforced by City watchdog the Financial Conduct Authority (FCA), also mean that no payday loan customer will have to pay back more than twice what they borrowed, and there is also a £15 cap on default charges.

Mr Osborne said: "I am absolutely determined to protect customers from abuse and sharp practice in the consumer credit market.

"That is why I capped the total cost of a payday loan, it's why we're taking further action today to tackle illegal loan sharks by ensuring that enforcement teams have the funding, from the industry, they need to protect consumers from those that would do them harm."

Fears have been raised that tighter rules governing payday lenders, who are regulated and licensed by the FCA, could lead to some people being turned down for loans following stricter affordability checks, and turning to loan sharks instead.

The Treasury said the amount each firm will pay into the levy and the total amount raised will be "set out in due course".