John McDonnell will announce plans on Monday for a cap on interest payments, protecting those trapped in a spiral of credit card debt.
Speaking in Brighton, McDonnell will say that those in debt should not have to pay back more than double of what they borrowed.
“We have seen with payday loans, some companies were making massive profits from people’s financial difficulties. Under pressure, the Government has been forced to cap interest payments on payday loans. But more than three million credit card holders are trapped by debt,” he will say.
“It means that no one will ever pay more in interest than their original loan,”
“If the Tories refuse to act, I can announce today that the next Labour government will amend the law.”
The new suggested rules would be similar to those enforced on payday loan companies back in 2015.
The Financial Conduct Authority estimated that lenders would lose almost £1.3 billion per year following the changes.
“The FCA has recently consulted on a package of measures to help those in persistent debt. This includes waiving or cancelling interest or charges when customers cannot afford any of the options proposed to repay their balance.” said an FCA spokesperson.
The chief secretary to the Treasury, said: “We set up the FCA, which is ensuring credit card firms do more to help customers clear debt and, from January, rip-off charges will be outlawed. The best way to help people with their finances is with our balanced approach to the economy.
“Labour take it too far and would damage our economy, meaning fewer jobs, higher taxes and more debt. Working people would pay the price, just like they did last time.”
McDonnell will also speak of the challenges of automation and industrial change, explaining Labour’s alternative approach to the problem.
“Huge changes are underway in our society and economy. Technological change is accelerating. This year Chinese scientists used quantum mechanics to teleport data to a satellite,” he will say.
“But we can match that: we’ve got a government full of people teleported from the 18th century. While the Tories remain stuck in the language and values of the Victorian era, we are determined that Britain embraces the possibilities of technological change – scary though they may be.
“By the middle of this century it is possible that up to half of all the jobs we do now could be automated away.”