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New Short Term Loan Legislation

Written By On 25/11/2013

The chancellor was talking to BBC Radio 4 earlier today and said

In fixing the banks we need to make sure we fix all parts of the banking and financial system and payday lending is part of it.

George Osborne was speaking about capping the interest that is charged on short term loans. The Financial Conduct Authority have already made it quite clear that when they take over from the OFT in April, all forms of financial lenders will be facing heavier restrictions than they do at present.

Mr Osborne commented that 'the overall cost of credit' which will include all the charges needs to be capped, and not just the interest rates.

He referred to the FCA and added that they will 'now go away and decide what is the best form of cap'.

The Banking Reform Bill that Parliament is looking at presently has now been altered to incorporate the new proposal relating to caps.

The new regulator are stamping down on other aspects of payday lending including the amount of roll overs a borrower will be able to have. It looks like the maximum number that will be allowed in the future will be reduced to two.

The chancellor calls it a 'logical step' and the Treasury feels that Australia have the right idea.

A spokesperson for the department compared it to recent legislation that has been introduced there by saying there is

growing evidence in support of a cap and emerging lessons from other countries, especially the cap on costs introduced in Australia this year. The Government believes it is right to use the opportunity of this legislation for Parliament to be clear on its intention.