LONDON – Britain’s financial regulator on Tuesday announced new limitations on what payday lenders can charge their customers, the latest step in moves to tackle poor conduct in the short-term credit industry.
The Financial Conduct Authority says Tuesday that from January, payday loan rates must not exceed a daily rate of 0.8 per cent of the amount borrowed — significantly lower than what many lenders currently charge.
Default fees for borrowers who fail to repay on time should be capped at 15 pounds ($25.7) and customers must never have to pay back more in fees and interest than the amount borrowed.
That means that someone struggling with repayments on a 100-pound loan should never have to pay back more than 200 pounds.
Britain’s payday loan industry has been under intense scrutiny amid anger over its poor regulation. Last month, the country’s biggest payday lender, Wonga, was ordered to pay out 2.6 million pounds ($4.4 million) to compensate tens of thousands of customers for dishonest debt collection practices.
Last year, 1.6 million consumers in Britain took out 10 million loans, with a total value of 2.5 billion pounds.