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FCA Regulations

Overview

The Financial Conduct Authority operate in the UK to provide a regulatory body for financial services to act as a watchdog for UK consumers and to ensure the financial institution adhere to a code of conduct in their financial products and services. Following the royal assent in 2013, the FCA took over the regulatory duties of the Financial Services Authority (FSA) to stabilise the market and protect payday loan consumers.

In addition the FCA has introduced a regulation where payday loans are now subject to a price cap to ensure consumers don’t fall into debt and a cycle of charges from high annual percentage rates. The Loan Ranger honours the FCA’s rules and takes the utmost pride in being a fair and responsible lender.

Consumer issues with payday loans

Payday loans have in recent times gained bad press where customers are unable to repay the loan and are affected by debt issues. This is in part due to the wider economic and social conditions which are getting tighter for everyone and also in part due to students who opt for quick cash without looking into other funding sources with lower interest rates.

borrower cannot repay. Credible lenders will always undertake a series of credit and affordability checks to protect the customer and their own interests, however not all lenders are reputable and as such, it is always advisable to undertake basic research into alternative funding options prior to securing a payday or quick loan.

FCA payday loans and the price cap

The regulations set by the FCA will now cap the amount a customer can repay in interest on a loan as of January 2015. There are three key areas the FCA which are intended to be assessed being:

  • Daily interest rates will be reduced to 0.8% per day
  • Default fees will be capped at £15
  • The total maximum cost of a payday loan will be capped at £100% therefore customers will never exceed the loan amount with interest.

It has been estimated that the changes will save an average of £193 for customers every year, which totals £250 million. The price caps have been introduced by the FCA with the sole intention of protecting consumers from unfair and bad lending practices as many rogue lenders will deliver extortionate fees layered with hidden charges.

Additionally, the caps also protect the fair and responsible lenders as well as consumers as bad practice impacts on all in the industry and not just the consumer. The FCA undertook substantial research to inform the price caps which exclusively involved:

  • Analysis of 8 firms and 16 million loans
  • Analysing payday loan alternatives by assessing the credit records of 4.6 million people
  • 2000 customers who were rejected were also assessed to see the impact on not receiving funding.
  • Assessment of regulatory bodies abroad to see their successful structures
  • Industry and consumer discussion groups

What does this mean for Loan Ranger customers?

We are an FCA licenced Credit Broker and not a lender. We take the utmost pride in exceeding our customers’ expectations and operate a firm and fair responsible credit brokerage service. Should you have any queries, please head over to our FAQs page for more information.