Payday loans interest rates capped from January

The Financial Conduct Authority has announced plans to impose a price cap on payday lenders from January.

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FCA reveals financial hardship of average loan users

Prior to announcing proposals for a new cap on the costs of taking out loans from payday lenders, the FCA conducted a survey of 2,000 representative customers.

The results identify the level of financial difficulties those borrowing endure.

FCA is proposing an initial cost cap of 0.8 per cent per day of the amount borrowed for new loans or loans rolled over. Credit: FCA
Currently 1.6 million people in the UK take out 10 million loans valued at a total £2.5 billion. Credit: FCA

Crackdown on payday loan costs will hurt 'many people'

The head of the Consumer Finance Association, which represents the industry, has urged people to consider the full consequences of a crackdown on the high costs and charges enforced by payday lenders.

Anyone who thinks that a price cap is good news for borrowers should have a thought for those many people who will be turned down for loans because the best lenders will have to reject those with the worst credit records.

We support a cap that allows the industry to operate profitably with the right protection in place for vulnerable people. With new regulations and tighter affordability checks, critics must now face up to the fact that most people use, need and like short-term credit and the measures in place are more stringent than for any other form of consumer credit.

– Russell Hamblin Boone, chief executive of the Consumer Finance Association



Key proposals of new cap on payday lenders

The Financial Conduct Authority's cap on the interest charges and fees set by payday lenders will ensure customers will never be hit with loan costs higher than the amount borrowed.

ITV News Business Editor Joel Hills has tweeted the FCA's key proposals:

FCA to impose payday lender price cap from January

The interest rates leading payday loan companies like Payday UK can charge is expected to be significantly reduced. Credit: Rui Vieira/PA Archive

The Financial Conduct Authority has announced plans to impose a price cap on payday lenders from January 2015.

The FCA confirmed earlier this year it planned to cap the total cost of credit for all payday loan firms from early next year following pressure from the Government.

Payday loans interest cap expected

Restrictions on the amount payday loan companies can charge on interest are expected to be announced by the industry watchdog later today.

Payday loan companies have been accused of trapping customers in a cycle of debt with high interest rates. Credit: PA

The Financial Conduct Authority (FCA) will impose severe restrictions on the amount of interest which each company can charge, as concerns over the excessive cost of fast credit spiral.

FCA chief executive Martin Wheatley will set out details of an industry consultation which will lead to a cap being in place by the start of next year.

Payday loans have proved a controversial business model, with many accusing companies like Wonga of "legal loan sharking" and exploiting those struggling to make ends meet.

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