Payday loans: the FCA price cap on what lenders can charge

Short-term, high-cost loans in the UK are subject to three Financial Conduct Authority limits: a daily charge cap, a cap on late fees and a cap on total cost. This guide explains how they work and where to get free help.

What the price cap is and which loans it covers

The Financial Conduct Authority (FCA), the regulator of UK consumer credit, set a price cap on what it calls high-cost short-term credit, which most people know as payday loans. The FCA confirmed the rules in November 2014 and they took effect on 2 January 2015. They apply across the whole of the UK, because consumer credit regulation is not devolved. The cap is written into the FCA Handbook's consumer credit sourcebook, known as CONC, and it limits what a lender can charge in interest, fees and other charges, including charges for debt collection. It applies to each loan agreement separately, so a second or third loan from the same lender is capped in the same way as the first. This guide was checked on 20 October 2026 against the FCA Handbook, the FCA's own announcement and Citizens Advice.

The three limits in plain words

The first limit is the initial cost cap. All interest and fees on a loan together must not exceed 0.8% of the amount of credit outstanding for each day, from the day the money is paid out until repayment is due. The second limit is the default cap: if a borrower misses a payment, the charges for that breach must not total more than £15, and interest on the unpaid amount cannot be charged above the same 0.8% daily rate. The third is the total cost cap, which says charges must not exceed the amount of credit provided. In practice a borrower never has to pay back more than double the sum they borrowed, however long the loan runs or however many times it is extended. The rules also say interest must be simple rather than compound, which means it is not charged on interest that has already built up.

A worked example

These figures are illustrative, not an offer from any lender. Suppose someone borrows £300 for 30 days. The daily cap is 0.8% of £300, which is £2.40 a day, so the most that could be charged over 30 days is 30 x £2.40 = £72. Repaying on time would then cost at most £300 + £72 = £372. The FCA gives the same result per £100: 30 x £0.80 = £24. Now suppose the loan is not cleared and charges keep building. The total cost cap stops charges at £300, because charges cannot exceed the amount borrowed. At £2.40 a day, that limit is reached after £300 divided by £2.40, which is 125 days. After that, the lender cannot add more interest and fees. The separate £15 limit on default charges applies alongside these caps.

Rules on affordability, rollovers and payments

Beyond price, the FCA Handbook requires lenders to make a reasonable assessment of whether a customer can repay without the repayments having a significant adverse impact on their financial situation. This is a requirement to look at what the borrower can afford, not just whether the lender is likely to be repaid. For high-cost short-term credit, a lender must not refinance, often called a rollover, on more than two occasions, and before agreeing one it must give the customer an information sheet that points to free debt advice. The Handbook also says a lender should not allow repeated agreements where the total payable would become unsustainable. Citizens Advice, on a page last reviewed in 2021, adds that when a payment is taken by continuous payment authority, meaning a card permission that lets the lender collect money repeatedly, a lender should not try it more than twice if funds are short, and should not take part payments. A payment can be stopped by telling the bank or card provider at least one day before it is due.

• Who it applies to: people in the UK who take, or have taken, a loan that counts as high-cost short-term credit from an FCA-authorised lender.
• Who it does not cover: credit that is not high-cost short-term credit, such as overdrafts, credit cards, longer-term loans and credit union loans, which have their own rules.
• Unauthorised lenders and loan sharks are outside the regulated system. Citizens Advice suggests checking a lender is FCA-authorised and being wary of any upfront fee.

Common mistakes and where to get free help

A frequent misunderstanding is that the cap makes these loans cheap. It limits the worst outcomes, but 0.8% a day is still a high cost, which is why the FCA and Citizens Advice describe such loans as unsuitable for long-term borrowing. Another is not checking the total payable before agreeing, particularly if the loan is extended, since each extension adds more interest and fees. If a lender seems to have charged above the limits, ignored the affordability rules or taken payments wrongly, a person can complain to the lender first. If they are unhappy with the final response, they can take it to the Financial Ombudsman Service, which is free to use, within six months of that response. The lender has eight weeks to reply to most complaints. If repayments are becoming difficult, free and independent help is available from MoneyHelper, Citizens Advice and StepChange. Citizens Advice also notes that credit union loans and agreed overdrafts are alternatives to consider, and that people on low incomes may be able to get emergency help from their local council. This guide gives general information only.

Check before you act

Price caps, rules and complaint time limits can change, and individual agreements differ. It can be worth confirming the details on the official pages linked below, and with the lender or a free adviser, before relying on any figure in this guide.

Sources

• FCA Handbook, CONC 5A (cost caps for high-cost short-term credit)
• FCA Handbook, CONC 6.7 (refinancing and continuous payment authorities)
• FCA Handbook, CONC 5.2A (creditworthiness assessment)
• FCA: FCA confirms price cap rules for payday lenders
• Citizens Advice: Payday loans
• Financial Ombudsman Service: Time limits