The Mirror has fought a long battle to highlight the impact of rip off lenders charging interest of 5,000% or more a year through our End Legal Loan Sharking campaign
Plans to cap the cost of payday loans have been branded "too weak".
City watchdog the Financial Conduct Authority today announced a crackdown on the controversial industry.
Confirming proposals from the summer, it said there would be a 0.8% daily limit on the interest and charges added to any loan not paid back on time.
There will also be a £15 limit on any default, or penalty, fees.
And vitally the total cost of the loan - including interest and fees - can not be more than double the original amount borrowed.
The FCA said the rate cap will mean someone paying no more than £24 interest on every £100 they borrow over 30 days.
The Mirror has fought a long battle to highlight the impact of rip off lenders charging interest of 5,000% or more a year through our End Legal Loan Sharking campaign.
FCA chief executive Martin Wheatley insisted the plans were the "right balance" for lenders and borrowers.
But Labour MP Stella Creasy, who has also championed the fight against payday lenders, called it an "early Christmas present for legal loan sharks."
Slamming the plans as "too weak", she said: "We’ve fought so hard to end legal loan sharking. Let's not let predatory lenders slip through the net now ."
The FCA says the payday loan market has slumped by 35% since it began regulating the sector in April.
It added: "We now estimate 7% of current borrowers may not have access to payday loans - some 70,000 people.
"These are people who are likely to have been in a worse situation if they had been granted a loan. So the price cap protects them."
Other campaigners welcomed the plans, calling a move in the right direction.
Mike O’Connor, Chief Executive of StepChange Debt Charity, said: “These rules address problems associated with the supply of payday loans, but we also need to address the demand for such harmful financial products.
"We see every day how payday loans have become the last resort for the financially desperate.
"Credit is rarely the answer to financial problems. We need better options for those struggling with the burden of debt – this is now the challenge for policy makers, creditors and the voluntary sector.”
Richard Lloyd, executive director of Which? said: “Today the regulator offers hope for millions of borrowers stuck in a cycle of debt, by confirming their plans to rein in the cost of payday loans and crackdown on excessive default charges.
“In the meantime the FCA must keep the cap on the cost under review and tightened up further if it doesn’t work as intended.”
Russell Hamblin-Boone, Chief Executive of the Consumer Finance Association, which represents some of the best known short term lenders, said: “Higher standards of conduct have gone hand in hand with a reduction in loans being approved.
"With the cap, fewer people will get loans from fewer lenders but the demand for credit will still be there and so there will be no significant impact on debt levels.
“The warning signs are already there. Only a quarter of people turned down for loans under tougher lending criteria said that they were better off not getting the money; the rest incurred charges for missed payments.
"The regulator will need to monitor this closely and act to prevent illegal lenders filling the credit gap.”
