Borrowers are to be protected from some of the worst excesses of the payday loan industry after financial regulator stepped in to impose a cap on the amount of interest and fees companies can charge their customers.
The Financial Conduct Authority clampdown means that people will never have to pay back more than twice the value of their loan no matter which service they opt for with daily interest and fees capped at 0.8 per cent and a limit on the charge levied on borrowers who default limited to £15.
It is believed the new rules will greatly reduce the viability of the industry, putting all but the three largest operators; Wonga, Dollar and QuickQuid, out of business.
Martin Wheatley, the FCA's chief executive officer, commented: “For people who struggle to repay, we believe the new rules will put an end to spiralling payday debts. For most of the borrowers who do pay back their loans on time, the cap on fees and charges represents substantial protections.”
There are currently 400 payday lender firms operating in the UK but the top three accounts for 72 per cent of all revenues between them.