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Campaigners welcome moves to cap payday loans

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Campaigners welcome moves to curtail charges imposed by payday lenders

Citizens Advice Scotland (CAS) has welcomed a proposed cap on the cost of payday loans.

The Financial Conduct Authority (FCA) has proposed a limit of 0.8% per day for all payday loans, alongside the principle that nobody should have to repay more than double the amount they borrowed.

It comes after intense pressure on the government to act to curtail the industry.

CAS head of policy Susan McPhee said: "We have been calling for a cap for some time, as one of the main actions that is needed to protect consumers from falling into crisis debt.

"What consumers want from lenders is choice, clarity and security.

"They want to be able to borrow what they need at a rate that is fair and clear, with no nasty surprises later when they have to repay. A cap will go some way to providing that.”

The FCA estimates that payday lenders will lose £420m a year as a result of the changes, or 42% of their revenue.

But it says consumers will save an average of £193 each a year.

The payday industry said the changes – due in January 2015 – would mean more people turning to loan sharks.

There will also be a cap on default charges, which is likely to be set at £15.

"For the many people that struggle to repay their payday loans every year, this is a giant leap forward," said FCA chief executive Martin Wheatley.

 

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