The FCA has extended its payday loan price cap until at least 2020, saying the regime has delivered “substantial benefits” to consumers.
The regulator announced the move in its review into high cost credit, published this morning.
The FCA says: “The review provides clear evidence that FCA regulation of high-cost short-term credit (often known as ‘payday lending’) has delivered substantial benefits to consumers.”
The regulator adds 60,000 borrowers are saving a total of £150m per year as a result of tougher consumer credit rules.
In 2015 the FCA said the interest and fees on payday loans should be capped at 0.8 per cent per day.
It also said default charges should not top £15, and that no borrower should ever pay back more than double the amount they borrowed.
Payday lenders are now much less likely to lend to those who cannot afford to repay, the regulator claims.
It adds debt charities are seeing far fewer clients with debt problems linked to high-cost short-term credit.
But the regulator does have “clear concerns” with other forms of high-cost credit.
The FCA says charges for unarranged overdrafts are often too high and can be hard for the public to understand.
The FCA also flagged up concerns in the rent-to-own, home-collected credit and catalogue credit sectors.
The regulator will consult on action to address these concerns in Spring 2018.
FCA chief executive Andrew Bailey says: “We are pleased to see clear evidence of improvement in the payday lending market after a period when firms’ treatment of customers and their business models were often unacceptable.
“However, there is more that we can do, and this review is about identifying the areas where consumers may be suffering harm so that we can focus our efforts accordingly.”
The FCA has also published proposals to clarify its rules on creditworthiness and affordability.