Glossary · UK
What is High-Cost Credit?
The FCA's regulatory category for consumer credit products with very high borrowing costs, including payday loans, home-collected credit and some guarantor and logbook loans.
Full Definition
High-cost credit is a category used by the Financial Conduct Authority (FCA) to apply extra consumer protection rules to credit products with unusually high borrowing costs, including payday loans, home-collected (doorstep) credit, catalogue credit, rent-to-own agreements, guarantor loans and logbook loans. The FCA's high-cost short-term credit (HCSTC) price cap, introduced in 2015, applies specifically to payday-style loans: interest and fees are capped at 0.8% of the amount borrowed per day, default fees are capped at £15, and the total cost of a loan (interest, fees and charges combined) can never exceed 100% of the amount originally borrowed. Lenders offering other categories of high-cost credit face additional FCA rules on affordability checks, forbearance for customers in financial difficulty, and clear risk warnings, following a series of FCA reviews into the sector from 2017 onwards.