Answers · UK 2025/26

What is the FCA cap on payday loan costs?

The FCA price cap limits payday and other high-cost short-term credit lenders to charging no more than 0.8% per day in interest and fees on the amount borrowed, a default fee cap of £15 if you miss a payment, and an overall cost cap ensuring you never pay back more in total fees and interest than 100% of the amount you originally borrowed. These rules have applied since January 2015 and significantly reduced the worst excesses of the payday lending market.

Last updated: 2 July 2026Last reviewed: 2 July 2026How we verify

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The Financial Conduct Authority introduced a price cap on high-cost short-term credit (commonly known as payday loans) from 2 January 2015, following widespread concern about spiralling debt caused by extremely high interest rates and repeated rollovers before regulation. **The three parts of the cap** The FCA's price cap has three separate elements working together: first, an initial cost cap of 0.8% per day on the amount borrowed, covering both interest and fees combined -- so borrowing £100 for 30 days would cost no more than £24 in total interest and fees under this element. Second, a default fee cap of £15, meaning if you miss a repayment, lenders cannot charge more than £15 in default fees, regardless of how many payments you miss (though interest can still accrue on the outstanding balance, within the overall cap). Third, and most importantly, a total cost cap of 100%, meaning you should never have to pay back more in total interest, fees, and charges than the original amount you borrowed -- so if you borrow £200, you would never repay more than £400 in total, even if repayments were significantly delayed. **Why the cap was introduced** Before 2015, some payday lenders charged extremely high APRs (sometimes over 1,000% or more when annualised) and allowed borrowers to repeatedly 'roll over' loans, adding fresh interest and fees each time, which could trap people in escalating debt from a relatively small initial loan. The FCA's cap was specifically designed to prevent this spiral by limiting the absolute maximum someone could ever owe. **Impact on the market** Following the introduction of the cap, the number of payday lending firms operating in the UK fell significantly, as some firms could not remain profitable under the new rules and exited the market or went into administration (including some very large, well-known brands). Consumer groups broadly credit the cap with substantially reducing the harm associated with payday lending, though concerns remain about people turning to other, less-regulated forms of borrowing when payday loans are unavailable or they are declined. **What counts as 'high-cost short-term credit'** The FCA's definition covers loans with an APR of 100% or more, that are due to be repaid (or substantially repaid) within 12 months -- this is the specific category of lending to which the price cap rules apply, distinguishing it from other forms of credit like guarantor loans, logbook loans, or standard personal loans, which are regulated differently and are not subject to the same specific 0.8%-per-day and 100% total cost caps. **Affordability checks still required** Alongside the price cap, FCA rules also require payday lenders to carry out proper affordability checks before lending, and to treat customers in financial difficulty fairly, including signposting to free debt advice. **Practical tip** Even with the cap in place, payday loans remain one of the more expensive forms of borrowing available, and cheaper alternatives (credit union loans, arranged overdrafts, 0% credit cards for eligible borrowers) should generally be considered first for short-term borrowing needs.