Shouldn’t the cost, or rate of interest be capped for short term loans, like in some countries?

The Treasury has announced plans for the Financial Conduct Authority (FCA) to cap the cost of credit for short-term loans in the UK, from January 2015, although the type and level of these caps has not yet been decided.

The Government had previously concluded that a price cap could reduce access to credit, cut the supply of credit and weaken competition - following in-depth research published in 2013 by the University of Bristol – so we believe the model to be implemented needs careful consideration.

Rate ceilings introduced in countries such as France and Germany appear to have led to credit exclusion and have exposed certain borrowers to inappropriate products and significant risk. Click here for the research article.

By Editor



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