Following on from the last blog on hardship loans, the Financial Conduct Authority (FCA) has finally announced a date in which a cap will be enforced on all pay day lenders.
The revision in legislation dictating pay day loans has been viewed as an attempt to ease the pressure on those struggling to keep up with spiralling interest rates. This will help to relieve the financial burden of those individuals tied down by unmanageable debt.
The FCA and supporters believe this is a positive step in regulating the growing pay day lenders industry, as the introduction of the caps will force existing companies to reply for their license. This will significantly limit the pool of pay day lenders available with the FCA estimating that only four key players will be left in the industry.
FCA chief executive, Martin Wheatley commented on the latest changes:
“I am confident that the new rules strikes the right balance for firms and consumers […] For people who struggle to repay we believe the new rules will put an end to spiralling pay day debts.”
From the 2nd January 2015, under the new guidelines interest and fees will be capped at 0.8% a day, with the total cost of the loan being restricted to 100% of the original sum. For example, an individual who borrows £100 from a pay day loan company, lending the money for 30 days will only incur no more than £24 fees in the sum is repaid within the time limit.
However, the FCA’s plans have been met by some scepticism from certain political bodies, particularly labour who argue that they have simply pushed forward the original draft of the plans published early in July. Debt campaigner Stella Creasy maintains that the cap must be lowered further to have a significant impact on the behaviour of pay day lenders.
For any advice in relation to debt issues, please don’t hesitate to contact our personal insolvency solicitors. We offer free initial advice on bankruptcy, IVA’s, Debt Management Plans and debt issues. To speak to a specialist solicitor please call 0845 050 1958 or fill out an online enquiry form.