High-cost lending to consumers is now subject to specific restrictions that do not apply to other forms of lending.

The key restrictions on high-cost lending are:

  • interest and fees charged on a high-cost loan are capped at 100% of the amount first advanced
  • the rate of charge (excluding default fees) on a high-cost loan is capped at 0.8% per day
  • lenders are restricted from making high-cost loans to some repeat borrowers
  • lenders have extra disclosure obligations.

We have developed guidance which explains these key restrictions. The specific rules are set out in the Credit Contracts and Consumer Finance Act 2003 and the Credit Consumer and Consumer Finance Regulations 2004. These rules are complex, and lenders are encouraged to take legal advice to ensure that they operate within the restrictions.

Read more about high cost loans PDF (2 MB)