2nd January 2015
Today sees the introduction of the price cap in the payday loan industry which will see the cost of borrowing reduce for millions of consumers. Under the new rules lenders can not charge more than £24 for every £100 borrowed and default fees can never be double what they initially borrowed and most lenders have implemented the maximum they can charge already with a few charging lower than the £24 threshold.
The FCA introduced the new capping measure to protect consumers from spiralling debt and have capped the industry at a daily rate of 0.8% of the amount borrowed. The rules for default fees have changed also with lenders not allowed to charge more than £15 at a time and can not be double what they borrowed and the FCA believe this is much more manageable if customers have to go onto debt plans to repay the debt.
The payday loan market has come under intense criticism and with the FCA taking control of the market since April 2014 they have promised to clean up the industry by introducing new regulations.
Financial analysts have commented saying that they will see the amount of loans significantly drop as lenders will become more stricter on who they will lend to and this will keep the FCA happy by being more stringent. The FCA do not complete want the payday loan market to disappear as people may turn to loan sharks but they do want the market to be more affordable and transparent about what lenders charge and who they lend to.
To get help please get help and advice contact the Money Advice Service