| answer text |
<p>The Government does not hold data on the trends in the level of interest charged
by payday loan companies.</p><p> </p><p>However, the Government believes that consumers
should be protected from unfair costs in the payday lending market. That is why the
Government legislated to require the Financial Conduct Authority (FCA) to introduce
a cap on the cost of payday loans. This came into force in January 2015 and means
that payday loans have a total cost cap of 100%, ensuring that consumers never need
to pay back more than twice the sum they have borrowed. This cap also includes a daily
interest cap of 0.8%, lowering prices for borrowers who pay back loans on time.</p><p>
</p><p>The FCA has also conducted a review of the cap. In July 2017 it released a
Feedback Statement as part of its review of the high-cost credit market. This showed
that the payday cap has been effective, leading to total savings of approximately
£150 million for the 760,000 individuals using payday loans each year, and highlighted
that many payday lenders lend at well below the 100% total cost cap. Overall, the
review concluded that consumers pay less, repay on time more often, and are less likely
to need help from debt charities.</p><p> </p><p>More broadly, the FCA requires regulated
lenders to treat customers fairly when they are in financial difficulty. FCA guidance
sets out that firms should provide support through tailored forbearance options for
borrowers which ensures they receive the most appropriate and sustainable support
for the long-term, including payment holidays where these are in the interest of the
consumer. On 25 May 2023, the FCA published a consultation on how it plans to incorporate
aspects of this tailored support guidance into its rules. The consultation can be
found here: <a href="https://www.fca.org.uk/publications/consultation-papers/cp23-13-strengthening-protections-borrowers-financial-difficulty-consumer-credit-mortgages"
target="_blank">https://www.fca.org.uk/publications/consultation-papers/cp23-13-strengthening-protections-borrowers-financial-difficulty-consumer-credit-mortgages</a></p><p>
</p><p>For people in problem debt who do need help, the Government continues to maintain
record levels of funding for free-to-client debt advice in England, bringing the 2023-24
debt advice budget for the Money and Pensions Service (MaPS) to £92.7 million. MaPS
is the single largest funder of debt advice in England. It works alongside partners
across the UK to make debt advice easier and quicker to access, and to improve standards
and quality across the sector. In addition to this, the Breathing Space scheme which
launched in England and Wales in 2021, offers people in problem debt a period of protection
of up to 60 days on most enforcement action, interest, fees and charges, and encourages
them to seek professional debt advice. As of May 2023 over 130,000 people have accessed
the scheme’s vital protections.</p><p> </p>
|
|
