Britain's financial regulators plan to cap the sky-high interest rates charged by so-called payday lenders for short-term loans. Critics have argued the industry's practices exploit those struggling to make ends meet. Hayley Platt listens to both sides of the argument.
They've been virtually able to name their price for years. Often charging sky-high interest rates when charges for short-term loans roll over to a much bigger bills for borrowers. Now, regulators plan to unleash a raft of new measures aimed at curbing payday lending. Loans will be capped at 0.8 percent per day. And Martin Wheatley of the Financial Conduct Authority said other measures will follow. SOUNDBITE: Martin Wheatley, Financial Control Authority, saying (English): "We've got a whole load of other changes about the use of roll overs, of the use of continued payment authorities, how people access the banks and actually we are toughening up on this industry now. So I think we will continue to see a big shake up in this industry." The cap means someone taking out a £100 loan for a month - will only pay a maximum of around £28 in interest. Noone will have to pay back more than twice what they borrowed. Currently, there's no limit. And there will be a cap on default charges, likely to be around £15. There are around 50,000 consumer credit firms operating in the UK. Two hundred of them offer short-term loans. But the interest rate can quickly rack up if the loan is not paid off quickly. That can send households spiralling into debt. But the industry body representing those firms fear the measures could end up hurting both the industry and the consumer. Russell Hamblin Boone is Chief Executive Officer of the Consumer Finance Association. SOUNDBITE: Russell Hamblin Boone, Chief Executive Officer of the Consumer Finance Association, saying (English): "It restricts choice and it restricts competition and it means that people who could have paid their loans and have been paying their loans in the past now won't be able to get credit." The CFA is also concerned that a heavily-regulated industry could push the most vulnerable towards other less savoury lenders. Something the consumer watchdog dismisses. SOUNDBITE: Martin Wheatley, Financial Control Authority, saying (English): "Actually, it's a very small minority of people who would actually consider going to a loan shark" Betty, Earl and Joyce have long been the respectable face of one payday lender: Wonga. It's faced its fair share of criticism. In an attempt to clean up its brand, new chief Andy Haste has retired its pensioner puppets. The reality is, the industry's future is likely to be a little smaller and a lot less profitable.