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FCA to consult on payday loan charge cap

The FCA is to consult on a cap on payday loan charges as it confirms the final rules that will govern the consumer credit market when it takes over regulation of the sector from the Office of Fair Trading in April.

The new rules include limiting the number of times a payday lender can rollover loans to two, and restricting the number of times a firm can seek repayment using a continuous payment authority to two.

But the regulator has not yet introduced a cap on charges as part of the rules.

In November the Treasury handed the FCA the power to cap overall payday loan costs.

The FCA says it will consult on a charge cap proposal this summer, and introduce a cap early next year.

A spokesman for the FCA says: “This is a complex issue and we want to make sure we get the detail right.”

From 1 April, consumer credit firms will also have to provide information to customers on access to free debt advice. Debt management firms will be required to pass more money to creditors from day one of a debt management plan, and to protect client money.

The FCA says firms which carry out higher risk business such as credit cards, debt management and payday loans will face “an intense and hands-on supervisory experience”.

It will also have the power to ban any misleading adverts from payday lenders.

FCA chief executive Martin Wheatley says: “Millions of consumers access some form of credit each day, from paying for everyday goods by credit to taking out a payday loan. We want to be sure the market works well when people need it – whether that’s for one day, one month or longer.

“Our new rules will help us to protect consumers and give us strong new powers to tackle any firm found to be overstepping the line.”

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