FCA: “Payday loan cap could harm consumers”

FCA: “Payday loan cap could harm consumers”

Category: Loans
Date: 12/04/2013

The Financial Conduct Authority (FCA) has claimed that proposals to impose limits on payday loan rates could prove harmful to consumers seeking emergency cash.

The regulator warned that capping rates for the controversial loans could impact negatively on those who required funds, claiming that borrowers could become "worse off" if restrictions were implemented.

"Many consumers use payday loans because, despite high APRs, that is the only source of credit available to high-risk borrowers in emergencies," the FCA insisted.

"They might be made worse off by caps on APRs or restrictions on how often they can borrow if they reduce availability to some consumers," it warned.

The Office of Fair Trading (OFT) has vowed to crack down on payday loan companies, after expressing concerns at the way some companies conduct themselves.

A report issued by the OFT last month revealed it was allocating a 12-week period to the UK's top 50 payday loan firms for them to re-assess and improve business practices or face losing their licences.

The online payday lender, MCO Capital Ltd, became the first casualty of the OFT's review in March after the government department found it had failed to conduct adequate identity checks for loan applicants, leading to the company being targeted by fraudsters.

What next?

Read our guide to Payday Loans
Find the best loan for you - Loans Calculator

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

Related Articles

Plans to lower payday loan costs finalised

The payday loans market has been under scrutiny for almost as long as it’s been around, and it’s just been the subject of a 20-month long competition investigation to determine how borrowers can get a better deal.

Payday loans increasingly used for essentials

We all know the perils of payday loans, yet it seems that many are still drawn to them. Even worse, it isn’t always for frivolous spending, as research has revealed that a worrying proportion of borrowers are using the money to pay for essentials.

Are you looking to consolidate your debts?

If you’re finding it hard to keep up with your credit repayments, it could be time to consolidate with a single personal loan. It can make things a whole lot simpler and could give you a clear route out of debt, so is it time to take the plunge?