The Financial Conduct Authority is to force payday lenders to limit how much they charge. The City watchdog said that, from 1 January next year, interest and fees charged by short-term lenders must not exceed 0.8 per cent per day of the amount borrowed.
Meanwhile fixed default fees will be capped at £15 and the overall cost of a payday loan should never be more than double the amount borrowed.
The aim is to curb the outrageous spiralling debt of vulnerable borrowers who in the past have seen their loan grow to three or four times the amount they've borrowed once lenders have hit them with late-payment fees and other penalty charges.
The watchdog said it estimated that the move would lead to average savings per payday loan borrower of £193 a year, and an average saving of £32 per loan.