Payday loan rate caps to ‘end spiralling debts’

A CAP on the fees and interest charged by payday lending firms is to go ahead in January in a move to protect borrowers from escalating debts.

The Financial Conduct Authority (FCA) said default fees will be capped at £15 alongside a limit of 0.8% per day on interest on unpaid balances. Picture: PA

The Financial Conduct Authority (FCA) said default fees will be capped at £15 alongside a limit of 0.8% per day on interest on unpaid balances in order to ensure that those who cannot repay on time will never have to pay back more in charges than the amount borrowed.

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The latest clampdown on the industry was unveiled by the FCA in July and confirmed today following a consultation period.

FCA chief executive Martin Wheatley said: “I am confident that the new rules strike the right balance for firms and consumers. If the price cap was any lower, then we risk not having a viable market, any higher and there would not be adequate protection for borrowers.

“For people who struggle to repay, we believe the new rules will put an end to spiralling payday debts.

“For most of the borrowers who do pay back their loans on time, the cap on fees and charges represents substantial protections.”

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