The government has faced renewed calls to impose caps on the rates charged by so-called payday lenders.
As MPs debated the Financial Services Bill at
on 23 April 2011, Labour MP for Walthamstow Stella Creasy said "struggling" families were borrowing money to meet their daily needs and "there is no end in sight to the financial pressures they face".
One in six Britons are "zombie debtors", she asserted, who are only able to service the interest on their debts and not reduce them.
Credit card rates, she said, had soared, leading people to turn to the high-cost credit market to make ends meet, adding that last year the payday loans sector was worth £1.7bn in Britain.
Ms Creasy said the creation of the Financial Conduct Authority (FCA), as part of the government's planned restructure of financial regulation in the UK, presented an opportunity to "take action as quickly as possible and prevent the problems that we have already seen in our communities from these loans becoming worse".
But Financial Secretary to the Treasury Mark Hoban warned: "There are significant risks to specifying in great detail on the face of the bill the precise type of rules the FCA may make.
"In doing so, we risk distracting the regulator from using its expertise and judgment to identify and address those risks which it considers pose the greatest risk to its objectives.
"I think what we should be doing is to create a framework within which technical experts can exercise their discretion, in a suitably constrained way, and leave them to get on with the job."
Under the terms of the bill, four major changes will be made to the Bank of England:
- the Financial Policy Committee will be established to look after the general well-being of the UK financial system
- a new Prudential Regulation Authority will monitor the performance of banks and other companies that manage significant risks on their balance sheets
- the effective and fair functioning of markets will be enforced by the new Financial Conduct Authority
- the regulation of clearing houses will become the Bank's responsibility.
The chancellor of the exchequer will also be given the power to veto any decision by the Bank of England to bail out a bank which is in financial trouble.
The provisions of the bill will extend to the whole of the UK but the consent of the Scottish Parliament, the Welsh Assembly and the Northern Ireland Assembly will be needed before they can be fully implemented.