Nov 25 - The UK government is to introduce a new law to cap the cost of payday loans. The move comes amid growing criticism of the interest rates charged by short-term lenders such as Wonga and Provident Financial which can be up to 4,000 percent per year. Hayley Platt looks at the changes.
5,000 percent is today's daily digit - the annual interest rate charged by some pay day lenders in the UK. Companies like Wonga have become a popular alternative to banks and the issue has become a major one. As a result the government is to introduce a new law to cap the cost of loans. The level will be decided by the country's new financial regulator. Finance minister George Osborne. SOUNDBITE: George Osborne, UK finance minister, saying (English): "We're looking at the whole package to look not just at the interest fee but also the arrangement fees and the penalty fees, this is all about having a banking system that works for hard working people, making sure that some of the outrageous fees you see and some of the absolutely unacceptable practices are dealt with and it's all about the government being on the side of hard working people." The loan companies say customers are made aware of the costs when they apply and say they're not doing anything wrong. They've certainly proved popular in recent years as many people struggle to get loans from banks. In 2011 and 2012 they issued more than 8 million loans and the industry is worth £2bln. The new law is expected to come into force next year and will affect some 240 payday loan firms. The UK is not the first country to introduce a cap. Australia has a monthly interest rate limit of 4% and maximum upfront fee of 20%