Retail Borrowing (Other Forms)

Question 1

What is a payday loan?

Answer 1

• A pay day loan is marketed as a loan that enables a borrower to get hold of cash before the next time they are paid by their employer.

Question 2

What are some of the payday loan regulations?

Answer 2

Payday lenders must:
- Conduct comprehensive affordability checks on all borrowers.
- Limit the number of loan roll-overs to two
- Display clear risk warnings on all adverts and promotions

Question 3

What are the three main changes the FCA implemented to the price structure of short-term loans/ credits to protect borrowers?

Answer 3

• Reduce the maximum daily interest rate to 0.8% per day.
• Cap default fees at £15 to protect customers who struggle to pay back the loan.
• Cap the maximum total cost of a payday loan at 100% so customers will never have to pay interest that exceeds the loan amount.