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High-cost short-term credit: the rules and the price cap explained
Payday loans and similar short-term credit have their own set of FCA rules. Knowing them helps you spot when a lender has gone too far.
In short
High-cost short-term credit is the FCA’s term for unsecured credit with an APR of 100% or more that is repaid within 12 months, such as payday loans. Since 2 January 2015 a price cap has limited what these loans can cost: interest and fees of no more than 0.8% a day, default charges of no more than £15, and total charges that never exceed the amount borrowed. Extra rules limit rollovers and how lenders take payments.
- The rules cover unsecured credit with an APR of 100% or more that is due to be repaid, or mostly repaid, within 12 months.
- Interest and fees must not go above 0.8% of the amount borrowed for each day of the loan.
- Charges for missing a payment are capped at £15 in total, however many payments are missed.
- Total charges can never be more than the amount you borrowed, so you never repay more than twice the loan.
- A lender cannot roll the loan over more than twice, and must stop using a continuous payment authority after two refused attempts.
- If repayments are a struggle, free debt advice is available before you agree to anything.
What counts as high-cost short-term credit
The FCA Handbook defines high-cost short-term credit, often shortened to HCSTC. A loan falls under the definition when all of these apply:
- it is a regulated credit agreement where a lender lends to you directly, or a peer-to-peer agreement
- the APR is 100% or more
- it is due to be repaid, or mostly repaid, within 12 months, or it is advertised as short-term credit
- it is not secured on your home or anything else you own
Payday loans are the best-known example. Some types of credit are left out of the definition even when they are expensive: home credit loans collected at your door, bill of sale loans (logbook loans), overdrafts, and loans from community finance organisations. The price cap below does not apply to them.
The price cap: three limits on what you pay
The FCA’s price cap has applied to every high-cost short-term credit agreement taken out since 2 January 2015. It has three parts, set out in chapter 5A of the FCA’s consumer credit rules (CONC).
| Part of the cap | What it limits |
|---|---|
| Initial cost cap | Interest and fees of no more than 0.8% of the amount borrowed per day. |
| Default cap | Charges for missed payments of no more than £15 in total. |
| Total cost cap | All charges together never more than the amount borrowed. |
The daily limit runs from the day you receive the money to the day it is due to be repaid. The default cap applies across every missed payment, not to each one, and interest on unpaid amounts cannot be charged at more than the same daily rate.
The FCA has said that, because of the cap, someone who takes out a loan for 30 days and repays on time will not pay more than £24 in fees and charges per £100 borrowed. And no borrower will ever pay back more than twice what they borrowed.
What the total cost cap covers
The total cost cap counts charges under the loan agreement and any connected agreement. When the FCA confirmed the cap, it said this includes debt collection and administration charges, and broker charges where the broker is in the same group as the lender or shares revenue with it.
If one high-cost short-term loan replaces an earlier one, the charges on both are added together and still cannot go above the amount of credit. A lender cannot reset the cap simply by issuing a new agreement to replace the old one.
Rollovers are limited to two
Rolling over, or refinancing, means extending the time you have to repay. Under CONC 6.7, a lender must not refinance high-cost short-term credit more than twice.
The exception is forbearance. If a lender extends your loan in a way where no further interest is added, and there is either no charge or only a small charge to cover the actual administration, that does not count towards the limit. That kind of help is meant for people who are struggling, and you can ask for it.
How lenders may take payments from your account
Many short-term lenders collect repayments using a continuous payment authority, where you give the lender your card details and it asks your bank for the money. The FCA rules in CONC 7.6 limit how this can be used.
- After two attempts to collect a payment have been refused, the lender must not try again under the same authority.
- The lender must not use it to take part of a payment, unless you have agreed a repayment plan and given express consent to the amounts.
- The lender must not mislead you about your right to cancel it, make cancelling unduly complicated, or fail to deal promptly with a request to cancel.
- Once the lender is told the authority has been cancelled, it must stop using it.
Cancelling a payment authority does not cancel the debt. You still owe the money. Cancelling can stop repayments leaving your account before your priority bills are paid, but talk to the lender or a free debt adviser about how you will repay.
The risk warning on every advert
Every advert for high-cost short-term credit must show this warning in a prominent way: “Warning: Late repayment can cause you serious money problems. For help, go to moneyhelper.org.uk”. It is there because missing payments on this kind of credit can lead quickly to bigger debts and more pressure on your budget.
If you are struggling to repay
Tell the lender as soon as you can. Then get free, confidential debt advice from MoneyHelper, StepChange, National Debtline or Citizens Advice before you agree to anything, and before you take out another loan to repay this one.
If you think a lender has charged more than the cap allows, rolled your loan over more than the rules permit, or kept taking payments after you cancelled, complain to the lender in writing. If you are unhappy with its answer, you can take the complaint to the Financial Ombudsman Service, which is free.
Common questions
Is a payday loan the same as high-cost short-term credit?
Payday loans are the most common type. The FCA’s definition is wider, though: it covers any unsecured loan with an APR of 100% or more that is due to be repaid, or mostly repaid, within 12 months, whether you repay it in one go or in instalments.
Does the price cap apply to logbook loans or doorstep loans?
No. Bill of sale loans (logbook loans) and home credit loans are excluded from the definition of high-cost short-term credit, so the CONC 5A price cap does not apply to them. Overdrafts and loans from community finance organisations are excluded too.
Can a lender keep adding charges if I miss payments?
Only within limits. Default charges are capped at £15 in total, and interest on what you owe cannot be charged at more than 0.8% a day. All charges together can never be more than the amount you borrowed.
How many times can a short-term loan be rolled over?
A lender must not refinance high-cost short-term credit more than twice. An extension where no further interest is added and there is no charge, or only a small administration charge, counts as forbearance and is not part of that limit.
What can I do if a lender has broken these rules?
Complain to the lender first, ideally in writing, and explain what went wrong. If you are not happy with the final response, you can take your complaint to the Financial Ombudsman Service for free.
Sources
Every fact in this page was checked against these official sources on 4 November 2026.
- Glossary: high-cost short-term credit FCA Handbook
- CONC 5A.2 Prohibition from entering into agreements for high-cost short-term credit FCA Handbook
- FCA confirms price cap rules for payday lenders Financial Conduct Authority
- CONC 6.7 Post contract: business practices FCA Handbook
- CONC 7.6 Exercise of continuous payment authority FCA Handbook
- CONC 3.4 Risk warning for high-cost short-term credit FCA Handbook
Written and fact-checked by the PiggyBank editorial team. Last reviewed 4 November 2026. This guide is general information, not financial advice. How we write and check our guides.
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