Payday loan companies will only be allowed to charge a maximum 0.8% interest per day, according to the new rules, which will take effect from January.
Payday loan charges have been heavily criticised for getting people into debt by praying on the poor and vulnerable, who are unable to borrow from standard financial institutions, such as banks.
FCA chief executive Martin Wheatley said,
“For people who struggle to repay, we believe the new rules will put an end to spiralling payday debts,”
Amongst other changes the FCA have announced there will be a £15 cap on the one-off default fee, which is the initial fee for a missed payment. A 100% total cost cap will also be placed on each loan to stop payday loan customers having a debt above double the amount they initially borrowed.
Payday Loan Charges
Currently there is nothing to stop payday loan charges from increasing indefinitely, however these caps will mean less people will see their debt spiralling out of control.
Another problem we often find people face with payday loan charges is the lack of transparency over how much someone will be charged, especially if they default.
These caps will mean even if someone is unaware of their payday loan charges, interest or default fees, they won’t be surprised with an unmanageable debt.
Dealing with Payday Loan Debt
If you are struggling to repay a payday loan it’s important you seek out charitable debt advice as quickly as possible, even though these caps are being introduced.
The sooner someone begins dealing with a debt, the better the options available to them will be and the easier it will be to become debt free sooner.
Call Debt Support Trust on 0800 085 0226.