New FCA rules result in loan sharks losing their teeth to bite borrowers

loan sharksFrom Friday 2 January 2015, payday lenders are now required to be fairer and in many cases cheaper and have had lost the ability to inflict misery on their customers that struggle to pay.

As a result of the new rules introduced by the Financial Conduct Authority (FCA) that regulates the market, it’s estimated that more than 100 payday loan firms have been driven out of business – 30 have closed down and a further 70 have simply stopped offering these products, while 450 high-street payday loan shops have also closed according to media reports.

“The crackdown on the payday lending market comes not a moment too soon. Lenders must now start competing on price and treating their customers fairly,” says consumer-rights boss Richard Lloyd at Which?

New Rules

  • Lenders can’t charge more than 0.8% of the total amount borrowed a day. This includes both interest and any other fees
  • Lenders can’t charge more than 100% of the amount borrowed – no matter what charges are incurred or how long the debt lasts
  • Charges for late payment, etc can’t be more than £15

What this means for the consumer

If a borrower takes a £100 loan for 30 days then they can’t be charged more than £24 in interest and charges.

On top of that, even if the borrower struggles to pay the money back, this won’t exceed more than £200 in total.

So borrowing from a payday lender isn’t ideal because it’s really expensive but better than the situation that existed before when borrowers could clock up debts running into thousands.

“Payday lenders have been holding vulnerable consumers to ransom with excessive rates and fees for far too long,” says David Mann, Head of Money at

“It’s high time these regulations were brought in, to break the cycle of extortionate lending and force unscrupulous lenders to radically change the way they do things or stop lending altogether. These rogue traders will only respond to tough action, and this is the toughest we’ve seen yet.”

Consumers of such products have the right to complain directly to the provider if they feel they haven’t been treated fairly. They can also write to the FCA that oversees the market as well as take the matter to the Financial Ombudsman Service eight weeks after first raising the issue if it hasn’t been resolved.

A consumer service to help make and track complaints against payday lenders, telecoms, energy companies, public services, travel, restaurants, shops and other establishments is run by Resolver.

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