Money & debt · UK guide

Payday loans — the caps, the cheaper routes, and how to complain for free

Last verified 12 Jul 2026 · Source FCA & GOV.UK · Information, not advice · Publisher: CA Capital Limited (company no. 10848369)

A payday loan is designed to look like a small, tidy solution to a short, ugly week. Sometimes it is. Far more often it is the moment a manageable problem becomes an unmanageable one — because the money you borrow to plug this month’s hole is money you will not have next month either. The good news is that the worst of the old market is gone: since January 2015 the FCA price cap has meant interest and fees can never exceed 0.8% a day, default fees are capped at £15, and you can never repay more than 100% of what you borrowed in interest and charges, however long it drags on. That is real protection, and it is worth knowing. But capped-expensive is still expensive — and there is almost always a cheaper door. This guide walks the cheaper doors first, then exactly what to do if you already have a loan you cannot repay, how to stop the payment coming out of your card, and how to complain — for free, without a claims firm — if you were lent money you were never going to be able to afford.

0.8%Maximum interest and fees per day — the FCA initial cost cap
£15Maximum default fee if you miss a payment
100%Total cost cap — you can never repay more than double what you borrowed
£0Cost of free debt advice — and of complaining about an unaffordable loan
What to do right now → Cheaper things to try first

The FCA price cap — what a payday lender can and can’t charge you

A payday loan is, in regulatory language, high-cost short-term credit (HCSTC) — broadly, credit with an APR of 100% or more that must be substantially repaid within 12 months. Since 2 January 2015 every firm offering it has had to obey the FCA price cap. Three rules, and they are absolute:

The capWhat it means for you
0.8% a day — initial cost capInterest and fees together must never exceed 0.8% per day of the amount you borrowed. On £100 borrowed, that is a ceiling of 80p a day.
£15 — default fee capIf you miss a payment, the fees they can add for defaulting must not exceed £15. They can carry on charging interest after you default — but not at a higher rate than the original one.
100% — total cost capYou must never pay more in fees and interest than 100% of what you borrowed. Borrow £200 and, however badly it goes and however long it runs, you can never be made to repay more than £400 in total.

Two more things worth carrying with you. First: a credit agreement that breaches the price cap is unenforceable — so if a lender is trying to charge you more than the cap allows, they are not just being unfair, they are outside the rules. Second: the cap does not apply to everything. It does not cover home credit (doorstep) loans, overdrafts, bill-of-sale (logbook) loans, credit secured on your home, or lending by community finance organisations like credit unions — those are governed by other rules.

Capped is not the same as cheap0.8% a day is a legal ceiling, not a bargain. It is still, by any normal measure, extremely expensive money — the cap exists because the market was worse, not because the product became good. If a payday loan is the only thing standing between you and a missed rent payment, take it seriously enough to spend twenty minutes on the cheaper list below first. Almost everyone who does finds something better.

Before you borrow — the cheaper doors, in order

Work down this list. It is roughly ordered cheapest and safest first, and the last one on it is the one almost nobody tries.

  1. A credit union. Not-for-profit, member-owned, and legally capped: the maximum a credit union in Great Britain can charge is 3% a month (about 42.6% APR) and in Northern Ireland 1% a month — and many charge well below their cap. Some run specific small, short-term loans for exactly the situations payday lenders target. Find yours through the Association of British Credit Unions or your council’s website.
  2. A Universal Credit Budgeting Advance — an interest-free advance of your own future UC, repaid gradually from later payments. If you’re on certain older benefits instead, the Budgeting Loan is the equivalent, also interest-free. Our Budgeting Loan guide has the detail, and Universal Credit advances covers the UC route.
  3. Your council’s crisis or welfare fund — in most cases a grant you never repay, for food, energy, essential white goods or an emergency. Scotland, Wales and Northern Ireland run their own schemes. See crisis grants.
  4. Ask your employer. Many now offer a salary advance or a hardship loan, usually free or near-free. It costs nothing to ask HR quietly.
  5. Check you’re claiming everything you’re owed. Vast sums of UK support go unclaimed every year. A ten-minute check can be worth more than the loan you were about to take.
  6. Talk to the creditor you’re actually behind with. This is the big one. If the payday loan is to pay the council tax, the energy bill, the rent or a card, then speak to them instead. They can offer time to pay; some are obliged to. Borrowing at 0.8% a day to settle a bill that would have accepted £20 a month is precisely how a hard month becomes a two-year problem. Our which debt to pay first guide sorts the ones that really can’t wait from the ones that can.
The bit lenders don’t advertiseFree debt advice is not just for people already drowning — it is for exactly this moment, before you borrow. StepChange (0800 138 1111) and National Debtline (0808 808 4000) will look at the whole picture with you in one call, for nothing, and they have seen your situation a thousand times. Citizens Advice does the same. Nobody there is selling you anything.

You already have one and can’t repay it — the calm order of moves

Breathe. This is recoverable, and the cap means the debt cannot grow forever. Do these in order:

  • Do not take another loan to repay this one. That single move — rolling one loan into the next — is what turns one bad month into a spiral. It is also, as it happens, the strongest evidence in a later complaint (see below).
  • Get free advice today. StepChange 0800 138 1111 · National Debtline 0808 808 4000 · Citizens Advice. Free, confidential, no judgement. Never pay a firm for advice you can get for nothing.
  • Tell the lender you’re in financial difficulty and ask for an affordable arrangement. Under FCA rules, firms must treat customers in financial difficulty with forbearance and due consideration — that means engaging with a realistic repayment plan, not just chasing.
  • Protect the essentials. Rent, mortgage, council tax, energy and food come before a payday loan. Always. Our which debt to pay first guide explains why.
  • Ask an adviser about Breathing Space — the government scheme that freezes interest, fees and enforcement action for 60 days while you get advice. And about longer-term options like a debt management plan or a DRO if the whole picture is unsustainable.
Stop the card payment if you need that money to livePayday lenders almost always collect by continuous payment authority (CPA) on your debit card — which means they can try to take the money the moment your wages or benefits land, before the rent does. You can withdraw that permission. Tell your bank to stop it and the bank must do so; it cannot insist you sort it out with the lender first. Full steps on our cancel a recurring payment guide. One honest warning: stopping the payment protects your rent and food money, but it does not cancel the debt — so use the breathing room to get advice and agree a plan, not to hope it goes away.

Complaining about an unaffordable loan — free, and often successful

Before lending, a firm must carry out a reasonable assessment of whether you can actually afford the repayments — not just whether you are likely to pay, but whether you can do so without hardship or having to borrow again. That is the FCA’s responsible-lending rule, and a great many payday loans were granted in breach of it.

You may have a complaint if, at the time you borrowed:

  • the lender did little or no checking of your income and outgoings;
  • you were borrowing repeatedly — loan after loan, or a new loan immediately after repaying the last — and the lender could see it;
  • the repayment would obviously have left you unable to cover rent, food or other credit;
  • your circumstances (existing arrears, a very low income, other high-cost debt) made it clear the loan was not sustainable.

How to do it, for nothing: complain to the lender first, in writing. Say what you borrowed and when, set out your income, outgoings and other borrowing at the time, and say plainly that you believe the lending was unaffordable and that proper checks were not carried out. Keep a copy. If the lender does not resolve it within 8 weeks, or you are unhappy with its final response, take it free to the Financial Ombudsman Service — you have 6 months from the date on the final response letter. The Ombudsman is free, independent and its decision binds the firm. Where a complaint succeeds, a typical outcome is a refund of the interest and charges you paid (plus interest on it) and the loan removed from your credit file — see your credit report.

Never pay a claims firm to do this for youClaims management companies advertise heavily around payday-loan refunds and take a slice of money that is already yours. You do not need one. The Financial Ombudsman says it plainly: its service is free and easy to use, and you don’t need to pay anyone to represent you. A friend, a family member or a free adviser (Citizens Advice, National Debtline) can help you write it. If a firm cold-calls or texts you promising a payday refund, treat it as a red flag and run it through our scam check.

Loan sharks — not a debt problem, a crime problem

Lending money to consumers as a business without FCA authorisation is a criminal offence. An unauthorised lender — a loan shark — is not bound by the price cap, will invent charges at will, and often relies on fear rather than paperwork. Check any lender on the Financial Services Register before you borrow; if they are not on it, do not.

Signs you may be dealing with one: no paperwork or written agreement; the amount owed keeps changing; they take your bank card, PIN, passport or benefit book as “security”; they add charges for missed payments with no explanation; they threaten you, your family or your home.

You are not the one in trouble — report it, in confidenceBorrowing from an illegal lender is not a crime by you. The lender is the criminal, and reports are taken in confidence. Threats, intimidation, and taking your card or documents are all separate offences. England: Illegal Money Lending Team — 0300 555 2222, 24 hours (stoploansharks.co.uk). Wales: Stop Loan Sharks Wales — 0300 123 3311. Scotland: Trading Standards Scotland — 0800 074 0878. Northern Ireland: Trading Standards Consumerline — 0300 123 6262. If you are in immediate danger, call 999.

The short version

  1. Before borrowing: credit union → Budgeting Advance / Budgeting Loan → council crisis fund → employer advance → check what you’re owed → talk to the creditor you’re actually behind with.
  2. If you borrow anyway: know the caps — 0.8% a day, £15 default fee, never more than 100% of what you borrowed in interest and charges.
  3. If you can’t repay: free advice today, tell the lender you’re in difficulty, stop the CPA if you need the money to live, ask about Breathing Space. Never borrow again to repay.
  4. Afterwards: if the loan should never have been granted, complain free — lender first, then the Financial Ombudsman. No claims firm.
  5. If the lender isn’t authorised: that’s a loan shark. Report it in confidence — you are not the one in trouble.
Do this now

One call, before anything else. If you are about to take a payday loan, or already have one you cannot repay, ring StepChange on 0800 138 1111 or National Debtline on 0808 808 4000 today. It is free, it is confidential, it takes one call, and it is the single highest-value thing on this page — they will look at the whole picture, including the cheaper routes you may not know exist and whether an old loan is worth complaining about.

Then, if money is being taken from your card before your rent is: stop the continuous payment authority. Got a letter you don’t understand? Put it through Decode. This is general information, not financial or legal advice — SortedUK is not FCA-regulated. Free, impartial help: Citizens Advice and MoneyHelper.

Related guides — money & debt
Debt help Budgeting Loan Which debt first Cancel a card payment Breathing Space
Source verification Primary sources: FCA — Price cap on high-cost short-term credit, GOV.UK — Report a loan shark, Financial Ombudsman Service — How to complain and FOS — Unaffordable lending. Last verified 12 July 2026. The price cap (confidence High — quoted from the FCA’s own page): initial cost cap 0.8% per day of the amount borrowed (interest and fees combined); £15 cap on default fees, with interest allowed to continue after default but not above the initial rate; total cost cap of 100% — borrowers must never pay more in fees and interest than 100% of what they borrowed; in force since 2 January 2015; credit agreements that breach the cap are unenforceable. HCSTC is defined in the FCA Handbook as credit with an APR of 100% or more, substantially repayable within 12 months; the definition excludes credit secured by mortgage/charge/pledge, lending by community finance organisations, home credit, bill-of-sale loans and overdrafts. Credit unions (confidence High): maximum interest of 3% a month in Great Britain (approx. 42.6% APR) under the Credit Unions (Maximum Interest Rate on Loans) Order 2013, and 1% a month in Northern Ireland — cross-checked against Citizens Advice and MoneySavingExpert; many credit unions charge less than the cap. Complaints (confidence High): complain to the firm first; refer to the Financial Ombudsman if there is no response within 8 weeks or you are unhappy with the final response, within 6 months of the date on the final response letter; the service is free and, in the FOS’s own words, “you don’t need to pay anyone to represent you, for example a lawyer or claims management company”. Loan sharks (confidence High — contact routes taken verbatim from GOV.UK): England Illegal Money Lending Team 0300 555 2222 (24-hour); Stop Loan Sharks Wales 0300 123 3311; Trading Standards Scotland 0800 074 0878; Trading Standards Consumerline (NI) 0300 123 6262; lenders can be checked on the Financial Services Register. Qualitative by design: Budgeting Advance / Budgeting Loan amounts and council crisis-fund amounts are not restated here (they vary and are set out on our own dated guides, /budgeting-loan, /universal-credit-advance and /crisis-grants); typical complaint outcomes (refund of interest and charges plus interest, adverse entries removed) are described as typical, not guaranteed, because every case turns on its own evidence; FCA responsible-lending and forbearance duties are summarised in plain English rather than quoted rule-by-rule. Scope: UK-wide, with the devolved loan-shark reporting routes and the Northern Ireland credit-union cap flagged separately. SortedUK is not FCA-regulated and not a debt adviser — this is general information, not financial advice. Free regulated help: StepChange 0800 138 1111, National Debtline 0808 808 4000, Citizens Advice and MoneyHelper.

Payday loans — common questions

How much can a payday lender legally charge me?

Three caps, all absolute. Interest and fees can never exceed 0.8% a day of the amount borrowed. Default fees are capped at £15 (they can keep charging interest after a default, but not above the original rate). And the total cost cap of 100% means you can never pay more in fees and interest than you borrowed — so £200 borrowed can never become more than £400 repaid in total. An agreement that breaches the cap is unenforceable. All of which makes the worst outcomes impossible — but 0.8% a day is still very expensive money.

What should I try instead?

In order: a credit union (capped at 3% a month in Great Britain, 1% in Northern Ireland, often far less); an interest-free Universal Credit Budgeting Advance or Budgeting Loan; your council’s crisis or welfare fund (usually a grant you never repay); an employer salary advance; a check that you’re claiming everything you’re owed — and, most under-used of all, simply asking the creditor you’re actually behind with for time to pay.

I can’t repay — can I stop them taking it from my card?

Yes. Payday lenders normally collect by continuous payment authority on your debit card, and you can withdraw that permission — tell your bank and the bank must stop it; it cannot insist you go to the lender first. See cancel a recurring payment. Be honest with yourself about what this does: it protects your rent, food and energy money, but the debt still exists. Use the space to get free advice (StepChange 0800 138 1111) and ask about Breathing Space, which freezes interest and enforcement for 60 days.

Can I get money back if the loan was unaffordable?

Possibly — and it costs nothing to ask. A lender must reasonably check you can afford the repayments before lending. If it barely checked, or kept lending while you were plainly rolling one loan into the next, complain to the lender in writing, setting out your income, outgoings and borrowing at the time. If it doesn’t resolve it in 8 weeks, or you’re unhappy with the final response, take it free to the Financial Ombudsman within 6 months of that response. Where complaints succeed, interest and charges are typically refunded and the loan removed from the credit file. Never pay a claims firm a share of your own refund.

What if the lender isn’t on the FCA register?

Then they are lending illegally — a loan shark, and a criminal. Check any lender at register.fca.org.uk. You are not in trouble for having borrowed. Report it in confidence: England 0300 555 2222 (24-hour) · Wales 0300 123 3311 · Scotland 0800 074 0878 · Northern Ireland 0300 123 6262. Threats or taking your card, PIN or documents are separate crimes — and if you are in immediate danger, call 999.

Sources: FCA — Price cap on high-cost short-term credit · FCA — High-cost short-term credit · Financial Ombudsman — Unaffordable lending · GOV.UK — Report a loan shark · Citizens Advice — Credit union loans · Credit Unions (Maximum Interest Rate on Loans) Order 2013. SortedUK is not FCA-regulated and this is general information, not financial advice. Free help: StepChange 0800 138 1111 · National Debtline 0808 808 4000 · Citizens Advice. Last reviewed: 12 July 2026.

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