Payday lenders will lose £420m in revenue a year as a result of the rate and costs cap being brought in from January 2015, ITV News Business Editor Joel Hills has tweeted:
FCA estimates that as a result of their cap payday lenders will lose £420m in revenue per year.
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 caps interest charges on payday loans and default fees. Overall cost of payday loan "will never exceed 100% of amount borrowed".
FCA says cost of borrowing a £100 payday loan for 30 days (repaid on time) will never exceed £24. It's currently £30.
FCA says default charges "cannot exceed £15". Wonga's was £30 but was recently lowered to £20.
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.
Restrictions on the amount payday loan companies can charge on interest are expected to be announced by the industry watchdog later today.
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.
The Financial Ombudsman has expressed concerns that too many people struggling to repay loans felt powerless to make a complaint because of the stigma surrounding payday loans.
Principal ombudsman Caroline Wayman said: "We often hear from people who took out a payday loan as a desperate last resort and blame themselves when the debt starts to spiral out of control.
It's important that people don't feel trapped with nowhere to turn because of the stigma associated with short-term lending."
The number of complaints over payday loans has more than doubled since 2012, new figures have shown, as the Financial Ombudsman warns people to speak up about debt worries.
Almost 800 people made complaints about payday lending in the 2012/13 financial year, a report released today shows, compared with fewer than 300 in the previous financial year.
In almost two thirds of cases taken on by the ombudsman, the office found in favour of the consumer.
- March 2013 - The UK's biggest payday lenders are threatened with being put out of business after a damning report uncovers evidence of "widespread irresponsible lending", by the Office of Fair Trading (OFT).
- June - The OFT refers payday lenders to the Competition Commission for a full-scale probe, saying it has found "deep-rooted" problems.
- July - The Archbishop of Canterbury told Wonga the Church of England wants to "compete" it out of existence as part of its plans to expand credit unions.
- November - More than one million people plan to take out a payday loan to cover the cost of Christmas 2013, research by the Money Advice Service (MAS) finds.
- June 2014 - The CMA says payday loan borrowers are paying around £60 a year over the odds because of problems shopping around.
Over-regulation of the payday loans market may force reputable lenders to abandon the practice and force the most vulnerable into the arms of loan sharks, a trade association has said.
Russell Hamblin-Boone, chief executive of the Consumer Finance Association (CFA), which represents short-term lenders warned against introducing too many rules to curb the industry's controversial practices:
The industry has already changed significantly for the better and short-term lenders are now leading the way through initiatives such as real-time credit checks.
However, over regulation is a real risk. Lenders are facing the prospect of a Government price control before the full impact of new regulations is known.
Borrowers consistently tell us how much they like and value short-term credit but if the regulator turns the screw too far and drives reputable lenders out of the market, these borrowers will be forced to look for credit elsewhere and this creates a perfect market for illegal lenders.
Controversial practices like rolling over loans more than twice will be banned in a clampdown on the predatory practices used by payday lenders, according to the industry watchdog.
The Financial Conduct Authority will also introduce obligatory warnings on adverts, so customers are aware of how difficult the problems caused by late repayments can be.
They will hen be led to the Government-backed Money Advice Service (MAS) for help.
The £2.8bn industry has come under fire for lending to people who have not been afford the repayments, meaning the loan is rolled over and the cost balloons.
Charity StepChange received nearly 14,000 cries for help last year from people who were struggling with five payday loans or more.
A rap song inspired by the Archbishop of Canterbury's warnings about payday loans has been released - complete with music video.Read the full story ›