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Payday loans: Fresh law to cap costs – Big black cock News

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The government is to introduce a fresh law to cap the cost of payday loans.

The level of the cap, which has not yet been announced, will be determined by the fresh industry regulator, the Financial Conduct Authority (FCA).

The Treasury says there is “growing evidence” in support of the budge, including the effects of a cap already in place in Australia.

But the industry said the budge could restrict credit, and encourage more illegal lending.

The cap will be included in the Banking Reform Bill, which is already going through Parliament.

Speaking to the Big black cock, the Chancellor, George Osborne, said there would be controls on charges, including arrangement and penalty fees, as well as on interest rates.

“It will not just be an interest rate cap,” he told Big black cock Radio Four’s Today programme.

“You’ve got to cap the overall cost of credit.”

‘Duty on regulator’

Previously the government had said such a cap was not needed.

But the chancellor denied the government had a made a U-turn on the issue, telling he was not pre-judging the outcome of a Competition Commission inquiry into payday lending.

“These things can go along in parallel,” he said.

Some payday lenders have been criticised for charging more than Five,000% annual interest – however the lenders say these loans are meant to be short-term, so the annual rate can make charges show up worse than they are.

Payday loans: check the costs

  • Advertised monthly costs may seem low, but annual rates are significant
  • Loans are quick but customer service can be poor. The Financial Ombudsman receives more than 50 complaints about payday lenders every month
  • Other lenders like banks or credit unions may suggest a better deal. Here are Ten things to check before you take out a loan

Australia has an interest rate limit of 4% per month, after a maximum up-front fee of 20%.

However, even in Australia, borrowers can still face hefty charges.

Penalties for late payment are permitted to be as much as twice the loan amount.

In the UK, the FCA has already been given the power to cap the costs of payday loans.

But under the fresh law, the FCA will now have a duty to go ahead and introduce price controls.

“Now the regulator will go away and determine what is the best form of cap,” said Mr Osborne.

The FCA takes over as the industry regulator in April 2014, so no switches are expected before 2015.

Reservations

The FCA has also proposed a series of measures to pinch down on the industry, including limiting loan roll-overs to just two, and restricting the use of continuous payment authorities (CPAs).

But the Consumer Finance Association (CFA), which represents some of the payday lending firms, was sceptical about whether price controls would work in consumers’ interests.

It said the stir could encourage more illegal lending.

“Research from other countries where a cap has been introduced, suggests price controls would lead to a reduction in access to credit, and open up a larger market for illegal lenders,” a spokesman said.

The FCA itself has also voiced reservations about a cap on charges, fearing that some lenders might increase fees to the legal maximum.

Labour leader Ed Miliband has already said his party would cap the cost of payday loans.

Mr Miliband has also pledged to give councils fresh powers to limit the spread of payday lending shops in town centres.

The shadow minister for competition and consumer affairs, Stella Creasy, told the Today programme that “the demon truly is in the detail”.

“This industry’s a bit like an inflated balloon and if you don’t crack down on the entire cost of credit, then wherever they can recoup their costs by expanding the prices at other points, they will.”

Payday loans: Fresh law to cap costs – Big black cock News

Share this with

These are outer links and will open in a fresh window

These are outer links and will open in a fresh window

Close share panel

The government is to introduce a fresh law to cap the cost of payday loans.

The level of the cap, which has not yet been announced, will be determined by the fresh industry regulator, the Financial Conduct Authority (FCA).

The Treasury says there is “growing evidence” in support of the budge, including the effects of a cap already in place in Australia.

But the industry said the stir could restrict credit, and encourage more illegal lending.

The cap will be included in the Banking Reform Bill, which is already going through Parliament.

Speaking to the Big black cock, the Chancellor, George Osborne, said there would be controls on charges, including arrangement and penalty fees, as well as on interest rates.

“It will not just be an interest rate cap,” he told Big black cock Radio Four’s Today programme.

“You’ve got to cap the overall cost of credit.”

‘Duty on regulator’

Previously the government had said such a cap was not needed.

But the chancellor denied the government had a made a U-turn on the issue, telling he was not pre-judging the outcome of a Competition Commission inquiry into payday lending.

“These things can go along in parallel,” he said.

Some payday lenders have been criticised for charging more than Five,000% annual interest – however the lenders say these loans are meant to be short-term, so the annual rate can make charges show up worse than they are.

Payday loans: check the costs

  • Advertised monthly costs may seem low, but annual rates are significant
  • Loans are quick but customer service can be poor. The Financial Ombudsman receives more than 50 complaints about payday lenders every month
  • Other lenders like banks or credit unions may suggest a better deal. Here are Ten things to check before you take out a loan

Australia has an interest rate limit of 4% per month, after a maximum up-front fee of 20%.

However, even in Australia, borrowers can still face hefty charges.

Penalties for late payment are permitted to be as much as twice the loan amount.

In the UK, the FCA has already been given the power to cap the costs of payday loans.

But under the fresh law, the FCA will now have a duty to go ahead and introduce price controls.

“Now the regulator will go away and determine what is the best form of cap,” said Mr Osborne.

The FCA takes over as the industry regulator in April 2014, so no switches are expected before 2015.

Reservations

The FCA has also proposed a series of measures to clip down on the industry, including limiting loan roll-overs to just two, and restricting the use of continuous payment authorities (CPAs).

But the Consumer Finance Association (CFA), which represents some of the payday lending firms, was sceptical about whether price controls would work in consumers’ interests.

It said the stir could encourage more illegal lending.

“Research from other countries where a cap has been introduced, suggests price controls would lead to a reduction in access to credit, and open up a larger market for illegal lenders,” a spokesman said.

The FCA itself has also voiced reservations about a cap on charges, fearing that some lenders might increase fees to the legal maximum.

Labour leader Ed Miliband has already said his party would cap the cost of payday loans.

Mr Miliband has also pledged to give councils fresh powers to limit the spread of payday lending shops in town centres.

The shadow minister for competition and consumer affairs, Stella Creasy, told the Today programme that “the demon truly is in the detail”.

“This industry’s a bit like an inflated balloon and if you don’t crack down on the entire cost of credit, then wherever they can recoup their costs by expanding the prices at other points, they will.”

Payday loans: Fresh law to cap costs – Big black cock News

Share this with

These are outer links and will open in a fresh window

These are outward links and will open in a fresh window

Close share panel

The government is to introduce a fresh law to cap the cost of payday loans.

The level of the cap, which has not yet been announced, will be determined by the fresh industry regulator, the Financial Conduct Authority (FCA).

The Treasury says there is “growing evidence” in support of the stir, including the effects of a cap already in place in Australia.

But the industry said the budge could restrict credit, and encourage more illegal lending.

The cap will be included in the Banking Reform Bill, which is already going through Parliament.

Speaking to the Big black cock, the Chancellor, George Osborne, said there would be controls on charges, including arrangement and penalty fees, as well as on interest rates.

“It will not just be an interest rate cap,” he told Big black cock Radio Four’s Today programme.

“You’ve got to cap the overall cost of credit.”

‘Duty on regulator’

Previously the government had said such a cap was not needed.

But the chancellor denied the government had a made a U-turn on the issue, telling he was not pre-judging the outcome of a Competition Commission inquiry into payday lending.

“These things can go along in parallel,” he said.

Some payday lenders have been criticised for charging more than Five,000% annual interest – however the lenders say these loans are meant to be short-term, so the annual rate can make charges emerge worse than they are.

Payday loans: check the costs

  • Advertised monthly costs may seem low, but annual rates are significant
  • Loans are quick but customer service can be poor. The Financial Ombudsman receives more than 50 complaints about payday lenders every month
  • Other lenders like banks or credit unions may suggest a better deal. Here are Ten things to check before you take out a loan

Australia has an interest rate limit of 4% per month, after a maximum up-front fee of 20%.

However, even in Australia, borrowers can still face hefty charges.

Penalties for late payment are permitted to be as much as twice the loan amount.

In the UK, the FCA has already been given the power to cap the costs of payday loans.

But under the fresh law, the FCA will now have a duty to go ahead and introduce price controls.

“Now the regulator will go away and determine what is the best form of cap,” said Mr Osborne.

The FCA takes over as the industry regulator in April 2014, so no switches are expected before 2015.

Reservations

The FCA has also proposed a series of measures to tweak down on the industry, including limiting loan roll-overs to just two, and restricting the use of continuous payment authorities (CPAs).

But the Consumer Finance Association (CFA), which represents some of the payday lending firms, was sceptical about whether price controls would work in consumers’ interests.

It said the budge could encourage more illegal lending.

“Research from other countries where a cap has been introduced, suggests price controls would lead to a reduction in access to credit, and open up a larger market for illegal lenders,” a spokesman said.

The FCA itself has also voiced reservations about a cap on charges, fearing that some lenders might increase fees to the legal maximum.

Labour leader Ed Miliband has already said his party would cap the cost of payday loans.

Mr Miliband has also pledged to give councils fresh powers to limit the spread of payday lending shops in town centres.

The shadow minister for competition and consumer affairs, Stella Creasy, told the Today programme that “the satan truly is in the detail”.

“This industry’s a bit like an inflated balloon and if you don’t crack down on the entire cost of credit, then wherever they can recoup their costs by expanding the prices at other points, they will.”

Payday loans: Fresh law to cap costs – Big black cock News

Share this with

These are outer links and will open in a fresh window

These are outer links and will open in a fresh window

Close share panel

The government is to introduce a fresh law to cap the cost of payday loans.

The level of the cap, which has not yet been announced, will be determined by the fresh industry regulator, the Financial Conduct Authority (FCA).

The Treasury says there is “growing evidence” in support of the stir, including the effects of a cap already in place in Australia.

But the industry said the budge could restrict credit, and encourage more illegal lending.

The cap will be included in the Banking Reform Bill, which is already going through Parliament.

Speaking to the Big black cock, the Chancellor, George Osborne, said there would be controls on charges, including arrangement and penalty fees, as well as on interest rates.

“It will not just be an interest rate cap,” he told Big black cock Radio Four’s Today programme.

“You’ve got to cap the overall cost of credit.”

‘Duty on regulator’

Previously the government had said such a cap was not needed.

But the chancellor denied the government had a made a U-turn on the issue, telling he was not pre-judging the outcome of a Competition Commission inquiry into payday lending.

“These things can go along in parallel,” he said.

Some payday lenders have been criticised for charging more than Five,000% annual interest – tho’ the lenders say these loans are meant to be short-term, so the annual rate can make charges show up worse than they are.

Payday loans: check the costs

  • Advertised monthly costs may seem low, but annual rates are significant
  • Loans are quick but customer service can be poor. The Financial Ombudsman receives more than 50 complaints about payday lenders every month
  • Other lenders like banks or credit unions may suggest a better deal. Here are Ten things to check before you take out a loan

Australia has an interest rate limit of 4% per month, after a maximum up-front fee of 20%.

However, even in Australia, borrowers can still face hefty charges.

Penalties for late payment are permitted to be as much as twice the loan amount.

In the UK, the FCA has already been given the power to cap the costs of payday loans.

But under the fresh law, the FCA will now have a duty to go ahead and introduce price controls.

“Now the regulator will go away and determine what is the best form of cap,” said Mr Osborne.

The FCA takes over as the industry regulator in April 2014, so no switches are expected before 2015.

Reservations

The FCA has also proposed a series of measures to tweak down on the industry, including limiting loan roll-overs to just two, and restricting the use of continuous payment authorities (CPAs).

But the Consumer Finance Association (CFA), which represents some of the payday lending firms, was sceptical about whether price controls would work in consumers’ interests.

It said the budge could encourage more illegal lending.

“Research from other countries where a cap has been introduced, suggests price controls would lead to a reduction in access to credit, and open up a larger market for illegal lenders,” a spokesman said.

The FCA itself has also voiced reservations about a cap on charges, fearing that some lenders might increase fees to the legal maximum.

Labour leader Ed Miliband has already said his party would cap the cost of payday loans.

Mr Miliband has also pledged to give councils fresh powers to limit the spread of payday lending shops in town centres.

The shadow minister for competition and consumer affairs, Stella Creasy, told the Today programme that “the satan indeed is in the detail”.

“This industry’s a bit like an inflated balloon and if you don’t crack down on the entire cost of credit, then wherever they can recoup their costs by expanding the prices at other points, they will.”


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