Payday loan price cap comes into effect

Customers taking out a loan on or after today cannot pay back more than twice what they borrowed. In addition, someone taking out a typical loan over 30 days and repaying on time will not pay more than £24 per £100 borrowed. Fixed default fees have also been capped at £15.

The FCA began regulating high-cost short-term credit on 1 April 2014, aiming to tackle poor conduct in the market. They also made new rules on affordability, advertising, rollovers and the use of continuous payment authorities in February 2014.

Last month, Wonga reduced the interest on its payday loans to 0.8%, the maximum rate of interest allowed under the new rules.

Additionally, the lender cut its missed payment fee from £20 to £15 (also the maximum permissible amount) and the minimum amount that can be borrowed has increased from £1 to £50.

FCA chief executive Martin Wheatley said:

"For people who struggle to repay, we believe the new rules will put an end to spiralling payday debts.

"For most of the borrowers who do pay back their loans on time, the cap on fees and charges represents substantial protections."