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MP hails breakthrough in tackling rip-off payday lenders
AN HISTORIC breakthrough on tackling rip-off payday lenders is about to be finalised - in one of Worcester MP Robin Walker's biggest victories.
A Government backed regulator has finally published its long-awaited plans aimed at helping people avoid spiralling debt.
The consultation document, which has been circulated to MPs from the Financial Conduct Authority (FCA) reveals:
- For new loans, interest and other fees will be capped at 0.8 per cent, per day, of the amount borrowed
- Default fees, designed to punish those who cannot pay back loans, will be capped at £15
- A "total cost cap" of 100 per cent is being introduced , meaning borrowers must never have to pay back more in fees and interest than the total amount taken out
The changes follow hard lobbying from parliamentarians, including Mr Walker, who has waged his own personal campaign against lenders.
In recent years he has told your Worcester News how householders in the city have contacted him because of escalating debt problems caused by hefty repayment rates.
In some cases, people have stung by interest rates of 1,000 per cent.
He said: "This is great news and something I have campaigned for over a long period of time.
"The total cost cap at 100 per cent is a very good idea and something that will make a big difference, ending the risk of people being caught in a trap of ballooning debt.
"There is more to go for, including 'real time' data sharing to make sure that people cannot take out multiple loans at the same time, and a levy to help pay for free debt advice "But this is a big step forward on one of the main concerns."
The FCA says it considered "an unprecedented amount of evidence" in drawing up the new rules, including 2,000 telephone calls with members of the public.
It says payday lenders will lose around £420 million in revenue per year - cash which will be kept by the public once it comes into force in January.
Martin Wheatley, the FCA’s chief executive officer, said: "For the many people that struggle to repay their payday loans every year this is a giant leap forward.
"From January next year, if you borrow £100 for 30 days and pay back on time, you will not pay more than £24 in fees and charges and someone taking the same loan for 14 days will pay no more than £11.20.
"That’s a significant saving."