The Financial Conduct Authority (FCA) has confirmed limits on costs, fees and interest charged by payday lenders, following wide consultation with various industry stakeholders.
From January 2nd, interest and fees must not exceed 0.8% of the loan amount per day, and default fees must not be greater than £15. Ultimately, a borrower will not pay back more than twice what they have borrowed.
The FCA estimates that through their regulations, 70,000 people are “protected” from payday loans – people that might have taken out loans and been worse off for doing so. However, Labour MP Stella Creasy has criticized the plans, arguing:
“Today’s news will be welcomed as an early Christmas present for Britain’s legal loansharks. This cap is just £1 lower than their current charges.”
Martin Wheatley, the FCA’s chief executive officer, has expressed confidence in the changes, stating:
“The new rules strike the right balance for firms and consumers. If the price cap was any lower, then we would risk not having a viable market, any higher and there would not be adequate protection for borrowers.”
Matthew Cheetham, Chief Executive of Harrington Brooks, is supportive of the changes, commenting:
“Harrington Brooks welcomes the efforts of the FCA to clean up the sector.” Adding “It is imperative that the regulator continues to enforce the new affordability requirements that came into effect in April.”