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Payday Lenders’ paydays to end

George Osborne yesterday committed to a further amendment to the Banking Reform Bill, adding an explicit duty on the FCA to impose a cap on the exorbitant rates charged by “payday lenders”. Fending off criticism from diverse sources, the Chancellor had previously insisted that existing regulatory powers were adequate and seemed reluctant to interfere in the operations of a notionally free market. Although, apparently “the government has always kept the case for a cap under review as the market has evolved” a Treasury spokesman said, also alluding to the 4 % cap imposed by Australia earlier this year. The Chancellor intends the FCA to cap “the overall cost of credit”, comprising: interest, arrangement and penalty fees, rollovers and fees to debit a client’s bank account.

While at the more transparently pernicious end of the spectrum, payday lenders are a part of Britain’s banking system; the Government’s previous reluctance to regulate was anomalous, particularly in light of the profound changes imposed on the more traditional banking sector. It remains to be seen whether the much-imposed upon Banking Reform Bill can reach its final reading stage without any further amendments.

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