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<p>The Government legislated in the Banking Reform Act 2013 to require the Financial
Conduct Authority (FCA) to introduce a cap on the cost of high-cost short-term credit,
including payday loans, in order to protect consumers from excessive costs. In designing
the cap, the FCA will take into account the interest rate and other fees and charges
which may be incurred in relation to a high-cost loan.</p><p> </p><p>As part of the
FCA's powers to cap the cost of credit in the Financial Services Act 2012, the Government
gave the FCA specific powers to prevent a lender enforcing a credit agreement and
recovering the debt, if the agreement contravenes its rules on the cost of credit.
It can also require that any money or property transferred under the credit agreement
must be returned.</p><p> </p><p>The FCA is currently conducting analysis to inform
the design of the cap; it has committed to publishing its proposed rules which implement
the cap in July. The FCA plans to publish final rules in the autumn and all lenders
must be compliant with the cap by 2 January 2015. The Government supports the FCA's
proposed timetable for implementing the cap: it allows the FCA appropriate time to
conduct analysis, consult on its proposals and ensure that firms are fully compliant
by January. It also allows the FCA to draw on the insight of the Competition and Markets
Authority's study into payday lenders in designing the cap.</p><p> </p>
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