News

FCA: “Payday loan cap could harm consumers”

FCA: “Payday loan cap could harm consumers”

Category: Loans

Updated: 12/04/2013
First Published: 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 Any products featured may be withdrawn by their provider or changed at any time.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

Are you getting married with hidden debt?

New research suggests that some couples are heading down the aisle without any idea of their partner’s true financial situation, with one in five concealing the extent of their debts from their betrothed.

Don’t waste hundreds of pounds on small loans

If you need to borrow a small amount of money to make that vital purchase, what would you do? Seeking a personal loan could well be the first thing that pops into your head, but unfortunately, it may not be the best solution…

Time to snap up a low-rate loan!

It’s a great time to be a borrower at the moment. Thanks to intense competition in the sector, not to mention low inflation, low base rate and the Funding for Lending Scheme, rates have never been lower – so it’s time to snap up a deal!
 
Close