The booming payday loan industry demonstrates a fundamental failure to protect our most vulnerable citizens from exploitation. Lenders who charge massive multiples of interest dominating our high streets is bad enough, but now some payday loan companies are aggressively marketing via children and pushing standards to a new low.

In Lambeth's deprived Coldharbour and Ferndale wards, Speedy Cash operatives dressed as cuddly kangaroos hand out sweets and balloons to children, along with leaflets advertising its loans, which typically charge more than 1,400% APR. They presumably hope the children, some barely old enough to walk, will deliver their leaflets into the hands of financially hard-pressed parents.

Although extortionate payday loans are legal, distributing non-political or religious leaflets without a local authority permit is not, under the Environmental Protection Act 1990. Having been told by council officers that they had written to Speedy Cash telling it to stop, I was incensed to see the kangaroo candy man still approaching children outside its Brixton shop.

To get the Brixton branch to stop there and then, without a letter, I had to threaten to get a police officer. In the shop, one customer, a nurse, told me, forlornly, that she knew she was being ripped off but no one else would give her credit, even though payday loan shops are meant to abide by the same lending rules as banks, building societies and credit unions.

This week, council licensing officers visited Speedy Cash to reinforce my message that it cannot advertise loans in this way. In the near future Lambeth's healthier high streets commission, set up to help residents make better informed choices when looking for a short-term loan, will report with measures to prevent new payday loan shops.

There is a very good case to refuse these shops planning permission on the grounds that they are unsustainable development. This is where planning officers could take more of an active role. The Local Government Act 2000 says that every local authority has the power to ensure "the promotion or improvement of the economic [and social] wellbeing of their area".

Evidence suggests that, apart from impoverishing customers who might otherwise support neighbouring businesses, payday loan shops push up rents, making other sorts of less profitable shops unviable. Neighbouring Southwark's recent attempt to use these grounds for blocking a payday loan shop in London Bridge failed on appeal because it was decided there was a lack of evidence to support this unsustainable development argument.

With a concerted effort, perhaps through the Local Government Association or London councils, I think we could easily collect enough evidence to exclude future loan companies charging extortionate interest rates.

In some US states it is either illegal or not feasible, given state law, to offer high-rate payday loans. Since 2007, a federal law has also capped lending to military personnel at a maximum of 36% APR.

English councils do not have this power, but the House of Lords recently recommended a cap on interest rates to the government. While we wait for time in the legislative programme, we in local government should take what action we can to restrict these drains on our local economy.

However, any action by a council to block, shut down or regulate payday loan companies more tightly must be accompanied by giving potential customers more options for borrowing and support in avoiding debt and poor choices in the first place.

I have been working with policy officers in Lambeth's welfare team to support our residents to make better financial choices. The answer is to build people's financial resilience, giving them proper sustainable choice and banking facilities while cracking down on those who would exploit them, legally or otherwise.

If we crack down on free-for-all legal lending without providing a decent alternative and financial education, we will push people into the even less forgiving arms of illegal loan sharks. It would be a sad irony if we managed to control the kangaroos of this market but instead fed the sharks.

Councillor Ed Davie is chair of Lambeth council's health and adult social care scrutiny committee

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