Regulator cracks down on payday lenders
THE financial regulator is getting tough with payday lending companies, who critics say are exploiting the poorest and most vulnerable in society.
From January 2015 there will be a or a cap on payday loan interest rates, the Financial Conduct Authority said. Rates will be capped at 0.8% per day of the amount borrowed.
The regulator said the proposals were “a giant leap forward” for people struggling to repay loans. The overall cost of a payday loan should not exceed 100% of the amount borrowed, and fees for defaulting on payments will not be more than £15 the regulator added.
The FCA said it expected its new rules would hit payday lenders’ annual revenues by as much as £420m per year.
Martin Wheatley, the FCA’s chief executive officer, said: “From January next year, if you borrow £100 for 30 days and pay back on time, you will not pay more than £24 in fees and charges and someone taking the same loan for 14 days will pay no more than £11.20. That’s a significant saving.
“For those who struggle with their repayments, we are ensuring that someone borrowing £100 will never pay back more than £200 in any circumstance.2
He added: “Alongside our other new rules for payday firms – affordability tests and limits on rollovers and continuous payment authorities – the cap will help drive up standards in a sector that badly needs to improve how it treats its customers.”
Recently Wonga, one of the largest players in the payday loans sector, was embroiled in scandal after it emerged it sent bogus legal letters to customers struggling to repay loans.
