New rules being added to next Wednesday’s Finance Bill will give the new City regulator enhanced powers to protect consumers from extortionate interest rates and unscrupulous practices.

But MPs fighting to control rogue lenders warned that the battle is far from won. Stella Creasy, the Walthamstow MP who has led the fight against legal loan sharks, said: “The Government has yet to publish its plans which are due to be voted on next Wednesday. If these are to make a difference the Government must introduce capping of charges and so reduce the costs to consumers of borrowing.”

Yvonne Fovargue, Labour MP for Makerfield, who has also campaigned against the lenders, warned that charges are just one part of the problem.

“There need to be limits on the use of continuing payment authorisations, which allow lenders to dip in and out of borrowers’ account at will.”

Meanwhile London Mutual Credit Union has developed a payday loan service for credit unions. It’s similar to a payday loan with fast turnaround and bank transfers – but a £400 loan from the scheme , known as CUOK! , will cost £8 compared to £120 at a typical payday lender. It’s only available in Southwark, Lambeth or Westminster at the moment, but it is hoped other credit unions will offer it.