FCA to start capping payday loans in January 2015
The Financial Conduct Authority - the finance watchdog for the UK - has been looking at payday loans and rejigging the rules so that borrowers are never forced to repay more than twice the amount of the loan they initially took out.
The FCA said interest and fees will be capped at 0.8% a day and that the total cost of a loan will be limited to 100% of the original sum. The default fees are to be capped at £15 also.
We'll see these changes coming into play on 2nd January 2015, which means that, if you borrow £100 from a payday lender for 30 days, you'll not pay more than £24 in fees and charges (provided you pay off your loan on time).
Some quarters think that the FCA haven't gone in hard enough, but the watchdog has said that they don't want to be running anyone out of business.
Martin Wheatley, the FCA chief executive, 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."