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Payday loan charges cap takes effect – Big black cock News

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A cap on the cost of payday loans enforced by the City regulator has now come into effect.

Payday loan rates will be capped at 0.8% per day of the amount borrowed, and no-one will have to pay back more than twice the amount they borrowed.

The Financial Conduct Authority (FCA) said those incapable to repay should be prevented from taking out such loans.

Many payday lenders have already closed down, in anticipation of the fresh rules, a trade bod has said.

And the amount of money being lent by the industry has halved in the past year.

Christopher Woolard, of the FCA, said the regulator had taken act because it was clear that payday loans had been pushing some people into unmanageable debt.

“For those people taking out payday loans, they should be able to borrow more cheaply from today, but also we make sure that people who should not be taking out those loans don’t actually get them,” he said.

Loan sharks

The switches mean that if a borrower defaults, the interest on the debt will still build up, but he or she will never have to pay back interest of more than 100% of the amount borrowed.

There is also a £15 cap on a one-off default fee.

Russell Hamblin-Boone, of the Consumer Finance Association, a trade figure for payday lenders, said the landscape of payday lending had switched.

“There will be fewer people getting loans from fewer lenders and the loans they get will no longer be the single payment loans for less than 30 days,” he said.

“The loans that are available now will be for three months or more and they will be at slightly higher values as well. Very few loans will be spinned over.”

‘Unscrupulous practices’

The FCA’s research suggests that 70,000 people who were able to secure a payday loan under the previous regulations would be incapable to do so under the fresh, stricter rules.

They represent about 7% of current borrowers.

Mr Woolard argued that only a very petite number would seek credit from unregulated loan sharks instead.

He added that the regulator would be monitoring the situation cautiously.

He also said that the reforms needed time to bed down before their effect was assessed. There has been some criticism that the initial review is scheduled in two years.

Richard Lloyd, executive director of Which?, said that the switches came “not a moment too soon”.

“The regulator has clearly shown it’s ready to take rough activity to stamp out unscrupulous practices, and they must keep the fresh price cap under close review,” he said.

“It is now time to turn the spotlight on unfair practices in the broader credit market. We want to see an end to excessive fees that also make it hard to compare different loans, including those charged for unauthorised overdrafts and credit cards.”

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A cap on the cost of payday loans enforced by the City regulator has now come into effect.

Payday loan rates will be capped at 0.8% per day of the amount borrowed, and no-one will have to pay back more than twice the amount they borrowed.

The Financial Conduct Authority (FCA) said those incapable to repay should be prevented from taking out such loans.

Many payday lenders have already closed down, in anticipation of the fresh rules, a trade assets has said.

And the amount of money being lent by the industry has halved in the past year.

Christopher Woolard, of the FCA, said the regulator had taken activity because it was clear that payday loans had been pushing some people into unmanageable debt.

“For those people taking out payday loans, they should be able to borrow more cheaply from today, but also we make sure that people who should not be taking out those loans don’t actually get them,” he said.

Loan sharks

The switches mean that if a borrower defaults, the interest on the debt will still build up, but he or she will never have to pay back interest of more than 100% of the amount borrowed.

There is also a £15 cap on a one-off default fee.

Russell Hamblin-Boone, of the Consumer Finance Association, a trade assets for payday lenders, said the landscape of payday lending had switched.

“There will be fewer people getting loans from fewer lenders and the loans they get will no longer be the single payment loans for less than 30 days,” he said.

“The loans that are available now will be for three months or more and they will be at slightly higher values as well. Very few loans will be spinned over.”

‘Unscrupulous practices’

The FCA’s research suggests that 70,000 people who were able to secure a payday loan under the previous regulations would be incapable to do so under the fresh, stricter rules.

They represent about 7% of current borrowers.

Mr Woolard argued that only a very puny number would seek credit from unregulated loan sharks instead.

He added that the regulator would be monitoring the situation cautiously.

He also said that the reforms needed time to bed down before their effect was assessed. There has been some criticism that the initial review is scheduled in two years.

Richard Lloyd, executive director of Which?, said that the switches came “not a moment too soon”.

“The regulator has clearly shown it’s ready to take raunchy activity to stamp out unscrupulous practices, and they must keep the fresh price cap under close review,” he said.

“It is now time to turn the spotlight on unfair practices in the broader credit market. We want to see an end to excessive fees that also make it hard to compare different loans, including those charged for unauthorised overdrafts and credit cards.”

Share this with

These are outward links and will open in a fresh window

These are outer links and will open in a fresh window

Close share panel

A cap on the cost of payday loans enforced by the City regulator has now come into effect.

Payday loan rates will be capped at 0.8% per day of the amount borrowed, and no-one will have to pay back more than twice the amount they borrowed.

The Financial Conduct Authority (FCA) said those incapable to repay should be prevented from taking out such loans.

Many payday lenders have already closed down, in anticipation of the fresh rules, a trade assets has said.

And the amount of money being lent by the industry has halved in the past year.

Christopher Woolard, of the FCA, said the regulator had taken activity because it was clear that payday loans had been pushing some people into unmanageable debt.

“For those people taking out payday loans, they should be able to borrow more cheaply from today, but also we make sure that people who should not be taking out those loans don’t actually get them,” he said.

Loan sharks

The switches mean that if a borrower defaults, the interest on the debt will still build up, but he or she will never have to pay back interest of more than 100% of the amount borrowed.

There is also a £15 cap on a one-off default fee.

Russell Hamblin-Boone, of the Consumer Finance Association, a trade bod for payday lenders, said the landscape of payday lending had switched.

“There will be fewer people getting loans from fewer lenders and the loans they get will no longer be the single payment loans for less than 30 days,” he said.

“The loans that are available now will be for three months or more and they will be at slightly higher values as well. Very few loans will be spinned over.”

‘Unscrupulous practices’

The FCA’s research suggests that 70,000 people who were able to secure a payday loan under the previous regulations would be incapable to do so under the fresh, stricter rules.

They represent about 7% of current borrowers.

Mr Woolard argued that only a very puny number would seek credit from unregulated loan sharks instead.

He added that the regulator would be monitoring the situation cautiously.

He also said that the reforms needed time to bed down before their effect was assessed. There has been some criticism that the initial review is scheduled in two years.

Richard Lloyd, executive director of Which?, said that the switches came “not a moment too soon”.

“The regulator has clearly shown it’s ready to take raunchy act to stamp out unscrupulous practices, and they must keep the fresh price cap under close review,” he said.

“It is now time to turn the spotlight on unfair practices in the broader credit market. We want to see an end to excessive fees that also make it hard to compare different loans, including those charged for unauthorised overdrafts and credit cards.”

Related movie: Payday Loans – Good Or Bad? Pros & Cons of Payday Loans.wmv



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