#AceFinanceNews – BRITAIN – Nov.09 – The City regulator is imposing a price cap on payday loans to help prevent borrowers being ripped off.
The FCA moves to limit costs in the short-term credit market, saying its rules will make it fair for both lenders and borrowers.
The Financial Conduct Authority’s (FCA) initial cost cap will come into force on 2 January, set at 0.8% per day.
The watchdog said that would lower costs for most borrowers, explaining that for all high-cost short-term credit loans, interest and fees must not exceed 0.8% per day of the amount borrowed.
Fixed default fees will be capped at £15 to help protect borrowers struggling to repay.
A total cost cap of 100% was aimed, the FCA said, at shielding people from escalating debts and it meant that borrowers must never have to pay back more in fees and interest than the amount borrowed.
The regulator said the changes would ensure that someone taking out a loan for 30 days and repaying on time will not pay more than £24 in fees and charges per £100 borrowed.
It announced the changes in July but put the conclusions out to consultation to try and ensure they were fair.