WALTHAMSTOW MP Stella Creasy has cautiously welcomed reports that the government is set to change the law to allow some limits on the amounts loan firms can charge.

The Labour member has been at the forefront of a high-profile national campaign calling for legislation to cap the fees of so-called 'legal loan sharks'.

The government has previously shied away from such a move but has now indicated it will alter its in-progress Financial Services Bill to give planned new regulatory body the Financial Conduct Authority the power to limit charges.

A Conservative amendment is set to be introduced next Wednesday when further details are expected to be announced.

It comes after the government faced a defeat in the House of Lords over the issue.

Ms Creasy said: "I’m cautiously optimistic about the government's u-turn on this and their commitment to bring forward proposals for caps on the costs of credit.

"We [campaigners] will wait to see what they propose and will only support measures which benefit consumers directly through impacting the price of credit."

She added: "Only last week that they continued to argue self regulation was the way forward and refused to act – citing codes of practice and a review of self-regulation planned for 2013.

"[These] developments show they now accept they have been on the side of the legal loan sharks for too long and it’s time to speak up for British consumers."

According to the BBC government insiders have denied the move is a u-turn and said they were intending on making such changes anyway.

Ms Creasy has accused payday loan firms of charging "extortionate" fees which can have a devastating impact on the most vulnerable people in society.

She has also expressed concern at the recent spread of such businesses targeting people in Walthamstow.

One example Ms Creasy cites is Wonga, which charges a typical annual rate of 4,214 per cent on its loans. The firm says the figure is misleading because it never lends cash for more than a month.

Some in the loan industry have spoken out against a possible cap, claiming it could back-fire by driving borrowers to use loan sharks instead and make their own businesses less viable.