Member Article

Regulator imposes cap on pay day loans interest

A cap of 0.8% interest per day on high-cost, short-term credit, the Financial Conduct Authority (FCA) has announced today.

The measures will come into effect from January 2015 as part of the FCA’s remit to protect borrowers against excessive charges in the market.

A consultation is now underway where members of the public and business can comment on the proposals for an interest rate cap.

A statement from the FCA read: “Our cap ensures that consumers will never need to pay back more than twice what they have borrowed, and someone taking out a typical loan over 30 days and repaying on time will not pay more than £24 per £100 borrowed.

“We looked at the potential impact of our price cap on firms and consumers, and we believe that it is proportionate and will benefit consumers.

“We expect the cap to lead to a reduction in lending and some customers who have previously taken out high-cost short-term loans will no longer get them. However, we believe that, apart from for a short initial period, they will be better off without loans.”

Those who wish to take part in the consultation should submit their views by September 1, 2014 - via the online response form here.

This was posted in Bdaily's Members' News section by Tom Keighley .