Price CapsIn 2014, the FCA confirmed that price cap rules would be introduced for payday lenders with the aim to stop people borrowing more than they should be and end up in massing debts. People who use payday loans and other providers of high-cost short-term credit could, as stated by the FCA, be assured that due to the price cap they would never have to pay back more than double of what they originally borrowed. The proposals for the price cap and the structure of it were as follows:
- There would be an initial cost cap of 0.8% per day. This was put in place to lower the cost for most borrowers.
- Fixed default fees were capped at £15. This was designed to protect the borrow who may be struggling to repay. Basically, if the borrower was to fail to pay back their agreed amount, the default charge for this could not exceed £15.
- To protect borrowers from escalating debt, the borrower will never have to pay back more in fees and interest than the amount that they borrowed. This does not mean that interest can no longer be charged, it just means that companies can longer charge extortionate interest in their fine print.