Price cap on high-cost short-term credit

Find out about the price cap on high-cost short-term (HCSTC) credit, including payday loans.

The price cap on HCSTC loans was introduced to protect consumers from excessive charges. Firms offering HCSTC loans must meet the following criteria:

  • an initial cost cap of 0.8% per day – interest and fees charged must not exceed 0.8% per day of the amount borrowed
  • a £15 cap on default fees – if borrowers default, fees must not exceed £15. Firms can continue to charge interest after default but not above the initial rate; and
  • a total cost cap of 100% – borrowers must never pay more in fees and interest than 100% of what they borrowed

Firms offering HCSTC

The price cap applies to HCSTC as defined in our Handbook. This covers credit agreements with an annual percentage rate which is equal to or exceeds 100% and is due to be substantially repaid within a maximum period of 12 months. Our definition of high-cost short-term credit does not cover:

  • credit agreements secured by a mortgage or a charge or pledge
  • credit agreement where the lender is a community finance organisation
  • a home credit loan agreement, bill of sale loan agreement or overdrafts

Any firm applying for authorisation for HCSTC permissions will be required to provide detailed information demonstrating they are compliant with our rules and their credit agreement fees and charges comply with the price cap.

Credit agreements will be unenforceable if they breach the price cap.

More information about the price cap and the detailed rules can be found in our policy statement PS14/16.