The Financial Conduct Authority (FCA) has denied reports that it is to significantly raise the payday loan price cap, which has now been in force for two and a half years.
The latest story first broke on June 11, when payday lender Quick Loans posted on its website that it was to return to the lending market. As a justification for the firm’s decision, the firm’s article confidently predicts that, from the start of 2018, the FCA will make two major changes to the price cap.
Quick Loans says that, from this date, the existing initial cost cap of 0.8% per day – equivalent to £24 on a £100 loan with a 30-day term – is to be raised by somewhere between 33% and 50%, so interest payable on a £100 loan could be capped at anywhere between £32 and £36. It also claims that the existing rule preventing borrowers from repaying more interest and charges than the amount they have borrowed is to be significantly altered. The article asserts that, next year, lenders will be able to charge borrowers twice the amount of their loan in interest and charges.
The third part of the existing price cap is a limit of £15 on default fees, but the article did not suggest that this was to be altered.
The June 11 article said:
“We have become aware that the FCA have been shocked at the number of lenders that left the industry, the lenders that are currently on the brink of leaving the industry and by the rise in more costly types of lending – including illegal loan sharks.
“We have been told, as have other lenders, that the cap is going to be relaxed from £24 per hundred to £32-£36 per hundred on January the 1st 2018.
“There is also due to be an increase in the total cap of the loan from a ceiling of 100% of the loan, to 200%. At present, the total charges by a lender including late repayments and interest cannot be more than 100% of the original loan – this is to change.”
An FCA statement in response to the article read:
“This article is complete fiction and does not reflect our position. The FCA’s review of high-cost credit, including the effects of FCA regulation on the payday lending market, is continuing and we will publish a feedback statement later in the summer setting out our views and next steps.”
Undeterred, Quick Loans published another statement on its website just two days after the original article, in which the firm re-stated its belief that the cap would be raised. The second article says:
“We stand by the fact that it is industry common knowledge that the cap is rising.
“Around September the FCA will make a statement and people can then make their own minds up about how accurate we were. We don’t have a reputation of being wrong.”
It is acknowledged by the FCA that they are reviewing the price cap, and that they will make a statement on this later in the year. Until such time as any new announcement is made, payday lenders remain subject to all three parts of the price cap.
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.