Government plans to cap the costs of loans have been welcomed by Christian campaigners.

Organisations working to relieve the crippling burden of debt have given the proposals a cautious welcome but also called for further steps to be taken.

Chancellor of the Exchequer, George Osborne, announced that a cap on the overall cost of credit, rather than just interest rates, will be introduced within the Banking Reform Bill currently making its way through parliament. The level of the cap has not been announced and will be set by the Financial Conduct Authority (FCA).

Christians Against Poverty (CAP), who last week launched their Christmas campaign to tackle food poverty, help people in financial hardship through debt counselling, financial education and jobclubs. Figures released earlier in the year showed 77 per cent of its clients took out payday loans to pay for food.

Matt Barlow, chief executive of CAP, commented: "We are really pleased this issue is still high on the government's agenda. Too many of our clients have fallen deeper into debt through high cost lending and we eagerly await the FCA new regulations in the spring."

CAP have been working with the FCA through their consultation process and recommend that as the proposals are implemented they include no rollovers for loans as well as real time credit checks and tighter rules on continual payment authority.

The Association of Christian Financial Advisers (ACFA) also welcomed the announcement. Spokesman Arwyn Bailey said: "We are delighted the government has finally heeded calls to protect the poor and end this culture of exploitation. What must happen now is a fair cap must be set on interest rates and credit charges across the board."

The ACFA called for the legislations to be tightly worded to prevent payday lenders from piling on arrangement fees, and mandate lenders to be certain the borrower can afford to repay the loan. "A fair model must also not be set to make sure interest rates don't get out of had in the future," commented Bailey.

Dr Dave Landrum, director of advocacy at the Evangelical Alliance, also welcomed the announcement: "After living through the longest economic boom in history our poorest are now forced to take out high interest loans to pay the rent and put food on the table. This is a consequence of being conditioned to accept debt as normal, rather than something to be avoided.

"We should thank God for the wonderful work of Christians Against Poverty, Christian credit unions and the vast range or poverty relief that the Church gives. However, if we really want to address the causes of this suffering, we have to look at the structural causes and take responsibility for modelling good stewardship."