Credit: Interest Rates

(asked on 30th October 2014) - View Source

Question to the HM Treasury:

To ask Her Majesty’s Government what is their assessment of the (1) highest, (2) lowest, and (3) average, cost of (a) interest charges, (b) penalty interest and charges, and (c) other charges, fees and commissions, borne by borrowers of pay day loans, as a percentage of the funds drawn down by those borrowers, over the last 12 months for which data are available.

Answered by
Lord Deighton
This question was answered on 17th November 2014

The Government has made no public assessment of these figures.

Financial Conduct Authority analysis estimates that in 2013, 1.6 million customers took out 10 million payday loans, with a total value of £2.5bn.

FCA analysis of payday loans funded in 2013 from a sample of lenders indicates that 56% of these loans were entirely repaid (with no unpaid debt recorded) within 31 days of receipt of funds, and 76% within 365 days.

Competition and Markets Authority analysis of the prices of payday products shows a range in interest rates and finance charges from £20 to £36 per £100 per month, for 1 month loans. In addition to this some firms charge fees irrespective of loan size of up to £20. Penalty charges of up to £30 are levied on the first day after a payment is missed and, in addition to this some lenders charge over £40 if a customer has not repaid after a longer time period.

The FCA has now published final rules on its cap on the cost of payday loans. This cap will be in place by 2 January 2015.

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