Government introduces new tax to fund crackdown on loan sharks

Lauren Fedor
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Ed Miliband Plans To Tax Payday Lender Profits
Former Labour leader Ed Miliband had proposed taxing payday lenders' profits (Source: Getty)

The government is today proposing a new tax to crack down on illegal money lending.

The Treasury tabled an amendment to the Bank of England and Financial Services Bill this afternoon that will give the Financial Conduct Authority (FCA) to introduce a new tax on consumer credit firms, including credit card issuers, credit brokers, payday lenders, peer-to-peer lenders, and debt management and debt collection firms.

Revenues raised from the levy will be used to fund government efforts to stop illegal money lending from 2017.

In December, chancellor George Osborne said the government was considering a levy in order to meet the funding needs of the England and Wales Illegal Money Lending teams, which the Treasury credits with prosecuting over 300 illegal money lenders and writing off over £50m of illegal debt.

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

The Treasury said it would set out more details about the scale and scope of the levy in due course.

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