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The new rules are the result of an investigation by the Competition and Markets Authority (CMA), published in February 2015.
Lenders are also required to display "prominently" a link on their own websites to a price comparison site. The industry has already complained about the increasing regulations. One of the best-known lenders, Wonga, has signed up with a comparison site called Choose Wisely. Following a separate investigation, the Financial Conduct Authority (FCA) imposed a cap on payday loan costs from the start of January 2015.
Review
The CMA says the new rules will:
- Allow customers to compare loans more easily, to establish the best value
- Give borrowers a clear explanation of fees and charges, making it easier to establish the cost of missing repayments
- Make it easier for new lenders to compete with existing players on price
The Consumer Finance Association, which represents payday lenders, says the price cap has already resulted in 600,000 fewer consumers having access to credit. It says the number of loans being approved since 2013 has fallen by 42%.
- Payday loan complaints triple
- Watch: the 'vicious' circle of payday loans
As part of its current enquiry into high cost credit, the FCA is reviewing its price cap on payday lenders. Borrowers pay no more than 0.8% of the amount borrowed per day, and a maximum of 100% of the loan in fees and charges. Default fees are also capped at £15.
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