UK watchdog to review payday loan interest rate cap
The cap on interest rates on payday loans and fees on unaffected bank overdrafts will be reviewed to see if any changes are needed, Britain’s Financial Conduct Authority (FCA) said on Tuesday.
The payday loan limit came into effect in January 2015 after lawmakers and the Church of England raised concerns about the impact of very high interest rates on vulnerable people who take out short-term loans for hold them until payday.
Regulation, introduced in 2015, caps interest rates at 0.8% per day, but rates as high as 1,509% persist
“FCA will assess whether there is any evidence to suggest that the cap should be changed. The FCA is also keen to see if there is any evidence that consumers are turning directly to illegal pawn shops because they have been excluded from high cost credit due to the price cap, ”the watchdog said in a statement.
Auto financing, credit cards, overdrafts and some installment loans could be included, the FCA said. The UK Competition and Markets Authority has come under heavy criticism from lawmakers for what they saw as a failure to tackle the high fees on unplanned bank overdrafts.
“The FCA will take a more detailed look at the findings from a consumer protection perspective, as well as from a competition perspective, using all of its powers,” the watchdog said.