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George Osborne denies U-turn as he moves on payday loans

By James Tapsfield and Sam Lister

George Osborne has denied caving in to Labour pressure after announcing a cap on the costs of controversial "payday loans".

The Chancellor said the limit, which will cover fees on the lending as well as interest, would help prevent vulnerable consumers being exploited.

The Government will bring in powers to impose the restriction through an amendment to the Banking Reform Bill, but the level of the cap will be set by the new Financial Conduct Authority (FCA).

The move comes after Opposition leader Ed Miliband complained earlier this month that payday loans firms such as Wonga were "running riot through our communities".

Shadow consumer affairs minister Stella Creasy has been among those pushing for tougher rules – but ministers had resisted the idea of a cap, warning that less creditworthy individuals could end up being forced into the arms of loan sharks.

In a round of broadcast interviews, yesterday, Mr Osborne rejected claims of a U-turn.

"I don't accept it's a departure from any philosophy," he said.

"The philosophy is we want markets that work for people, and people who believe in the free market, like myself, want that free market to be properly regulated."

He added: "I am happy to pay tribute to some individual MPs who have campaigned on this issue.

"But the idea that the Labour leadership, who were running this country for 13 years and did nothing in this space, took a lead is, frankly, fanciful."

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