Payday loan firms have received heavy criticism in recent months due to targeting vulnerable customers with loans charging high amounts of interest and other fees to individuals often already considered in financial difficulty in need of debt advice and debt management help.
Ministers have now publically announced that the government will introduce a new law to limit the cost of payday loans as the industry comes under mounting scrutiny. Treasury officials explained there is “growing evidence” internationally in support of the move.
The Financial Conduct Authority (FCA), who regulates the payday loan industry, has not yet announced the level of the cap on the payday loans.
George Osborne explained the next logical step would be to control the overall cost of credit, including the arrangement, rollover and penalty fees, as well as on interest rates. The cap will be included in the Banking Reform Bill, which is already going through Parliament.
Some payday lenders have been criticised for charging more than 5,000% annual interest – though the lenders say these payday loans are meant to be short-term, so the annual rate can make charges appear worse than they are.
The Financial Conduct Authority has already been given the power to cap the costs of payday loans, but under the new law, the FCA will now have a duty to go ahead and introduce price controls. The FCA told payday lenders tougher regulation would soon be implemented. It said all borrowers should have an “affordability” check before being given a loan and suggested risk warnings should be put on adverts.
At Burgess Bowen Financial Management, we help people resolve unaffordable payday loan debt by offering a payday loans debt help solution tailored to your individual circumstances. It is important that you carefully consider all the advantages and disadvantages of any debt solution service. It is also recommended that you speak with the Money Advice Service who offer free and impartial debt advice.
Complete our application form and an experienced debt advisor will call you straight back to let or call us on 0800 917 5104.