Mohsin Mehdi, CEO of My Community Bank, has welcomed the decision to impose a cap on payday loans.

The national, not-for-profit credit union launched yesterday to offer affordable loans to help people who have been targeted by payday lenders.

Mehdi said: “After months of well-meaning handwringing, the fightback against the payday lenders has begun. Handled right, these curbs could protect hundreds of thousands of vulnerable people from payday lenders’ extortionate charges.

“The restrictions must be more than just an interest rate cap, as for many people it’s the hidden costs – fees and rollover charges – that make borrowing from a payday lender so punitively expensive, but also a debt trap from which it is hard to escape.

“The government and the Archbishop of Canterbury have called on credit unions to provide an alternative to payday lenders. Today we have launched the first national credit union that seeks to do just that – taking the fight to the payday lenders by offering affordable loans to the many thousands of Britons who can’t borrow from the high street banks.

“The payday lenders have successfully marketed themselves by trivialising debt and the eye-wateringly high cost of the credit they provide. Ultimately the government should seek to restrict their ability to portray themselves as benign. They are anything but.

“Today is an important first step in the fight to restrict their power – My Community Bank is seeking to provide some genuine competition, and together with the FCA cap on their cost, this should force them to end their exploitative charges.”