Member Article

FCA enforces pay day lending cap

A cap on pay day loans by the The Financial Conduct Authority (FCA) has now come into effect.

According to the BBC, Payday loan rates will be capped at 0.8% per day of the amount borrowed, and the cap means that no-one will have to pay back more than twice the amount they borrowed.

The amount of money being lent by the industry has halved in the past year and many lenders have already closed down due to the forthcoming regulations.

70,000 people (around 7% of current borrowers) who were able to secure a payday loan under the previous regulations would no longer be able to do so under the new, stricter rules, the FCA’s research suggests.

Christopher Woolard, of the FCA, said the regulator had taken action because it was clear that payday loans were the direct cause of unmanageable debt.

He said: “For those people taking out payday loans, they should be able to borrow more cheaply from today, but also we make sure that people who should not be taking out those loans don’t actually get them,”

Russell Hamblin-Boone, of the Consumer Finance Association, a trade body for payday lenders, said: “There will be fewer people getting loans from fewer lenders and the loans they get will no longer be the single payment loans for less than 30 days,” he said.

“The loans that are available now will be for three months or more and they will be at slightly higher values as well. Very few loans will be rolled over.”

Mr Woolard argued that only a very small number would seek credit from unregulated loan

This was posted in Bdaily's Members' News section by Ellen Forster .