More than a million people in the U.K. will see the cost of their borrowing fall now that new price caps on payday loans have taken effect, the Guardian reported.
Interest and fees on all high-cost short-term credit loans are now capped at 0.8 percent per day of the amount borrowed. If borrowers do not repay their loans on time, default charges must not exceed £15 ($23), and total cost is capped at 100 percent of the original loan, so no borrower will ever pay back more than twice what was borrowed. The new rules from the Financial Conduct Authority went live on Jan. 2.
The FCA estimated that in 2013, 1.6 million customers took out around 10 million loans.
At the same time, new rules covering payday loan brokers took effect after the regulator was deluged with complaints over practices such as imposing charges that consumers often knew nothing about until they checked their bank account.
Payday loan brokers now cannot request an individual’s bank details or take a payment from the borrower's account without their explicit consent in advance. Payday loan brokers will also have to include their legal name, not just their brand name, in all advertising and other communications with customers, and state prominently in their ads that they are a broker, not a lender.