Pay Day Loans Rate Cap

Pay Day Loans Rate Cap.

In the news again today, the finance industry regulator, the Financial Conduct Authority (FCA) is to introduce new rules to cap the maximum amount of interest at Pay Day Loans lender can charge.

Concerns have been raised across many sectors included the Treasury Select Committee and even the Archbishop of Canterbury has been very public about the matter.

Comment

It is all too easy for people to borrow money.  It is even worse when you are desperate and need to feed children, so many are tempted to borrow short term and extremely high interest rates.  We have seen rates at 2000+% APR.

Of course, these loans are designed to short term and can be high risk, hence the high interest rate but it is staggering to think that the largest growth sector in the financial industry during the recession has been Pay Day Loans, but they have waited until today to look at policing properly.

In hindsight, we do not think it is legal to price cap.  It removes competition, but we do recognise the need for all lenders, whether it is a low cost mortgage or a high rate pay day loan, to lend responsibly.  If the Pay Day Lender is not acting in a clear, fair and not misleading way, then they should be de-authorised, business closed and directors tackled by the FCA.

Capping charges we do not see as reasonable in a free market, but we do recognises why the FCA would look to do this to protect consumers from sharp practice.