A limit has been introduced; restricting the amount payday lenders can charge borrowers from January.
The Financial Conduct Authority (FCA) has stated that Interest rates will be capped at 0.8% of the amount borrowed per day and that no customers will have to pay back more than double the sum they borrowed.
In addition to these measures there will also be a £15 limit on default charges.
The Regulator pointed out that a person borrowing for 30 days, and repaying on time, would not pay more than £24 in fees and interest per £100 borrowed.
Martin Wheatley from the FCA said: “I am confident that the new rules strike the right balance for firms and consumers. If the price cap was any lower, then we risk not having a viable market, any higher and there would not be adequate protection for borrowers.
“For people who struggle to repay, we believe the new rules will put an end to spiralling payday debts. For most of the borrowers who do pay back their loans on time, the cap on fees and charges represents substantial protections.”
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