The rates that are often charged on payday loans have hit the headlines over the past couple of years as a result of the rising number of people who have turned to these loans due to the financial climate. Many have ended up in spiralling debt as a result of these loans and there have been repeated calls for regulations and for steps to be taken about the high levels of interest charged by payday lenders.
It was reported earlier this week that new regulations had been put into place for the payday loans industry. It has now been revealed that the government is changing the law to enable the interest rates that are charged by payday lenders to be restricted. This will be done by amending the Financial Services Bill to give the Financial Conduct Authority the power to limit the levels of interest charged.
The move is likely to be welcomed by both campaign groups and the rising number of consumers who have been forced to turn to payday loans to tide them over during difficult times. Some payday lenders have been charging in excess of 4,000% APR on loans.
It has been reported that the cap may not be a blanket one but that the Financial Conduct Authority may investigate different loans schemes and then limit the amount of interest being charged. Amendments to the bill are set to be made next week, with Treasury minister Lord Sassoon stating that the FCA needed to ?grasp the nettle? when it came to payday loans and needed to have the power to ensure the cost of borrowing was capped where necessary.
Labour peer Lord Mitchell, who put down the amendment to the bill, described the payday industry as being ?on the fringes of legality? and said that it was an industry that was being run by cowboys. He stated that the changes would help many people who were caught up in a spiral of debt, adding that it would be unscrupulous payday lenders who would lose out.
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Source: http://www.loans4.co.uk/blog/?p=1721
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