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11/26/13 - UK to Cap Pricing on Payday Loans

The Chancellor of the Exchequer announced on Nov. 25 that the government will seek a cap on payday loan costs through an amendment to bank-reform legislation currently in Parliament. Under the amendment, the Financial Conduct Authority would introduce a cap that covers the total cost of credit, including interest, arrangement, and penalty fees. The FCA has been asked to include the payday loan initiative in its work program for taking over credit-sector regulation from the Office of Fair Trading in 2014.

The announcement follows earlier reviews by the OFT and FCA that concluded against the early introduction of such a cap.

“The government made clear it was creating a powerful new consumer regulator in the FCA,” said Stuart King, a managing director at Promontory in London. “The credit sector will see significant changes as the FCA assumes responsibility for regulating credit, and firms should be prepared for those changes when they apply for FCA authorization.”

Additional Information:

Please contact Stuart King (+44 207 997 3402) for further information on Promontory’s view of these developments.