The duty to cap the cost of credit was formally established through the Financial Services (Banking Reform) Act 2013.
This will be one of a number of powerful measures that the FCA proposes to use to ensure consumers are treated better when applying for, and repaying, payday loans. As well as a cap on the cost of credit, the FCA has proposed to require a mandatory affordability check for every loan, capping the number of rollovers to two, and limiting to two the number of times a payday lender can dip into a bank account to seek payment. We believe these measures will protect consumers but also allow businesses to operate successfully.
In October we published our proposed regime for all consumer credit activities, for which the FCA takes over the regulation on 1 April 2014. As we said at the time, we need to gather more information before we can cap the cost of credit. This is a complex issue and there are many different aspects to consider to ensure that we get a cap that works well for the UK market. That means researching it, economic analysis and then publicly consulting on its use.
We will also consider the lessons of other countries that have adopted this power to ensure that any cap is right for UK consumers.
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