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Worried women

New rules could make it harder to get a payday loan

As the new year dawns, are you wondering how you'll pay the Christmas bills? If you were considering a payday loan, you may need to think again - new rules from 2 January mean getting one could be more difficult.

The changes mean borrowers should pay back less, and there will be stricter affordability checks and better advice for customers.

But fewer people are likely to be able to get their hands on this short-term, high-cost credit. 

What’s changed?

From 2 January no borrower will repay more in fees and charges than they initially borrowed and any fees incurred for a missed repayment will be capped at £15. Also, interest and fees charged can’t be greater than 0.8% a day of the money borrowed. This means lower costs for most borrowers, as the charges don’t grow quickly over a short period of time.

These changes are on top of those already announced in 2014. Among these are a limit on the number of times a lender is able to roll over your loan and the number of attempts lenders can make to take money from your account – both being limited to twice.

How will the new payday rules affect potential borrowers?

The new payday loan rules aim to increase protection for borrowers who are struggling to make repayments. They’re intended to lower the cost of borrowing and increase protection for those who are at risk of escalating debt.

However, it’s expected the limits on what lenders can charge could see many shut up shop, making it more difficult for some borrowers to find a willing lender. In fact, the Financial Conduct Authority (FCA), which regulates this field, estimates around 70,000 people won’t be able to get a payday loan as a result of the rule changes.

Payday loan brokers

It’s not just lenders who will need to change how they work, as payday loan credit brokers are also affected by the new rules.

Some people may have used a payday loan credit broker to help find the best loan for them in the past. But some of these firms haven’t made it clear they are a credit broker and not a lender, and have been charging unauthorised fees for services not provided. In many cases the customer was unaware they’d been charged.

From 2 January credit brokers are required to make it clear to borrowers who they are and what services that they provide, including a breakdown of any fees they charge.  They also need to explain when these fees must be paid.

Most people don’t need to use a broker as it’s not difficult to do a little research and go directly to the lender.

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  • clinton / 26 June 2018

    I came across this loan company on Facebook and I contacted the email I saw and all a sudden I was approved of a loan of $60,000usd so I never believed all this can work till I was credited $60,000usd I will advice anyone who is in need of a loan to contact this loan company for help of a loan this is the company email [t r u s t l o a n 8 8 @ g m a i l . c o m or contact him on whatsapp @ +1 845-400-7189‬

  • Darren / 23 January 2015

    Have used Pay Loan Companies in the passed because it was the only way to get money fast but never again they rob you blind.

  • Ray Jones / 13 January 2015

    I'd never pay interest rates that are so high.