Cap welcomed on the amount payday lenders can charge customers

Payday loan rates will be capped at 0.8% of the amount borrowed a day, the Financial Conduct Authority (FCA) have announced.

In total, no one will have to pay back more than twice what they borrowed, and there will be a £15 cap on default charges.

The loan restrictions will start from January the regulator said.

I have campaigned for tough action on payday lenders since my time as Chief Executive of St Helens Citizens Advice Bureau before I entered Parliament in 2010.

It’s a beginning not an end. The industry is very fast moving and the FCA need to be vigilant to ensure they do not find loopholes and invent new products that disadvantage vulnerable consumers. The effect of the cap and other rules need to be reviewed on at least a yearly basis.

Looking to the future greater choice in the market is needed. People who are in a position to borrow need a responsible short-term credit market. A vital part of this is the choice that is offered. That is why the mainstream High Street banks and Credit Unions should seize the opportunity to meet demand and offer their customers a better alternative to payday loans.

The price cap plan - which includes both interest and fees - remains unchanged from proposals the regulator published in July.