A proposed crackdown on payday lenders will not spell the end of legal loan sharking in the UK, according to Stella Creasy MP.

Today, the Financial Conduct Authority proposed a cap on short-term lending.

As of January 2015, interest and fees on new loans, including those rolled over, must not exceed 0.8% per day of the amount borrowed.

The cap imposed by the watchdog works out at £24 per £100 on a 30 day loan.

In its report in 2012, the Office of Fair trading found the average cost to be £25 per £100.

Responding to the move the Walthamstow MP, who has campaigned for tighter controls on the loan market, said: "Anyone who thinks the announcement is the end of legal loan sharking in Britain is in for a nasty shock.

“The cap proposed today by the FCA works out at only a pound less than the companies are currently charging, meaning its likely to have at best a limited impact on their lending behaviour.

“With the news there are almost 400 of these legal loan sharks in Britain, rather than the 240 the Government once claimed, getting this right is even more important.”

Miss Creasy claims the cap still leaves UK consumers less protected than people in the US and Canada, and that it should be brought in sooner.

“The FCA should and could go much further in providing the protection consumers in Britain need from the vicious cycle of debt these loans all too often create,” she added.

The FCA rules mean that any borrowers will never pay more in fees and interest than the amount borrowed.