Payday loans: Cap confirmed at last.

The City regulator has confirmed it is setting a price cap on payday loans to help ensure borrowers are not being ripped off.

The Financial Conduct Authority's (FCA) initial cost cap, due to come into force on 2 January, has been set at 0.8% per day.

Fixed default fees will be capped at £15 to help protect borrowers struggling to repay.

A total cost cap of 100% was aimed, the FCA said, at shielding people from escalating debts and it meant that borrowers must never have to pay back more in fees and interest than the amount borrowed.

Read the whole ruling from MSN-Money HERE

---

AT LAST, we hear what is going to be done about these rip-off merchants.

It is a good start, but I, for one, hope this will only be "the start".

That's good news Paps, but it does not go nearly far enough.

All that is going to happen here is that many people who used to use these pay-day-loans companies are now going to go to their local loan shark for the money they need.

Ok, I do agree that this is mostly their own fault, but I do think that if the poorer people were made a little bit better off by decent legislation, many of them would not need to go to any kind of a loan shark at all.

It all comes down to the rich and the poor and the gulf that separates them, and until that gulf is addressed many of these people will still foolishly go to lenders that just want to rip them off.

I agree that this does not go far enough, but it is a good place to start.

You are also right that it is the massive gap between the rich and the poor in Britain that gives these lenders their existence.

If life was not so hard at the bottom end many of these people would not get into such debt in the first place as they could then probably get safer and more sensible loans from the normal banks.

There will always be some who simply cannot handle their debts properly and for those ones the answer is much more complicated.

It's all about credit-scores.

The banks depend a great deal on the results they get from the credit scoring companies as to whether they are going to give people a loan or not. A friend of mine, who works in a bank, once said to me that the banks never lend to people who need the money as if they do they are going to be at risk of defaulting on any such loan.

Credit scoring is based on your history of handling debt and if you have never had any bank loans or bank credit cards they are not going to start giving you these things.

Basically, the annual income that any family has is the amount of money that any high-street bank will use as a standard for the ease these families or individuals might have of repaying any loan they might get.

Ergo, those that might need that money are very unlikely to get any from the  banks that are now terrified of what they consider to be "toxic" lending.

Thanks Angie, for your great comments.

Yes, the banks certainly are terrified of what they call "toxic lending" as it was this kind of lending that helped to bring down the banks just a few years ago.