Payday loans costs are to be capped under plans being announced by Chancellor George Osborne today.
The changes will be implemented through an amendment to the Banking Reform Bill currently going through Parliament, and will put a duty on the Financial Conduct Authority (FCA) to use powers it already has to impose a cap.
The cap will cover fees charged on the loans as well as interest.
Earlier this year Labour announced it would cap the cost of credit from payday lenders, and force them to put funding into credit unions.
Richard Lloyd, Which? executive director, said: ‘We’re pleased the Government is committed to taking tougher action on payday loans by capping the sky-high fees and charges that drag people down in a spiral of debt.’
See our guide if you are having problems paying back your payday loan.
Irresponsible payday lenders
Which? research on credit earlier this year has found that eight in 10 consumer – around 38.5 million adults – use some form of credit.
Four in 10 people who take out payday loans use them to pay for essentials like food and fuel.
Responding to the Treasury’s payday loan announcement today Richard Lloyd added: ‘This will need to be part of a wider clean up of the credit market. The Government and the Financial Conduct Authority must clamp down on irresponsible lending and excessive fees across the board, whoever the lender.’
Our guide helps give you step-by-step guidance on complaining about a payday loan company.
Clean up Credit
Which? has set out five ways the FCA should act to clean up the credit market, and send a clear message to irresponsible lenders:
- Ban excessive default fees and charges
- Crack down on irresponsible lending
- Put people in control of their credit
- Clear and transparent information on the cost of credit
- Swift and early intervention for people in financial difficulty
Your story can help us make the financial regulator take further action. Join our Clean up Credit campaign.