Payday loans can become debt traps quickly — particularly when the full amount plus interest is due in one lump sum at the end of the month. If you cannot repay, knowing your rights under FCA rules is essential.
What Payday Lenders Can and Cannot Do
| Allowed | Not allowed | |
|---|---|---|
| Interest and fees | Up to 0.8%/day; default fee up to £15 | Total repayment exceeding 2× original loan |
| CPA retries | Two failed attempts maximum | Further CPA attempts without your permission |
| Chasing payment | Letters, emails, phone calls at reasonable times | Harassment, misrepresenting their powers |
| Debt sale | Can sell debt to collection agency | Cannot instruct collection agency to misrepresent powers |
| Rollover | Must explain cost clearly | Cannot roll over more than twice (industry code) |
The FCA Price Cap — Your Protection
Since 28 January 2015, all FCA-authorised payday lenders (high-cost short-term credit) must comply with:
- Daily interest cap: 0.8% per day (e.g. £24 on a £100 loan per 30 days maximum)
- Default fee cap: Maximum £15
- Total cost cap: You cannot be charged more than 100% of the original loan — so if you borrowed £200, the maximum you repay in total is £400
Loans from unregulated lenders (which are illegal in the UK) are not covered by these caps.
Cancelling a Continuous Payment Authority (CPA)
A CPA is different from a Direct Debit. With a CPA:
- The lender can take money whenever they choose, not on a fixed date
- They can take partial amounts
- It is linked to your debit card number, not your bank account directly
To cancel a CPA:
- Contact your bank (not the lender) and tell them to cancel the CPA
- Under Payment Services Regulations, your bank must cancel it immediately
- Cancelling the CPA does not cancel the debt — you still owe it — but it protects your account from being cleared unexpectedly
Requesting a Repayment Plan
FCA rules require payday lenders to treat customers in financial difficulty fairly, including by:
- Directing you to free debt advice services
- Offering you a repayment plan if you cannot repay in full
- Freezing interest and charges if you enter a repayment arrangement
How to ask: Contact the lender in writing (email is fine). State you are in financial difficulty and cannot afford the repayment. Request a repayment plan with interest and charges frozen.
Complaining About Irresponsible Lending
If a lender approved a loan you could not afford — particularly if you had a poor credit history, had previously defaulted with them, or were clearly in financial difficulty at the time of application — you may have an affordability complaint.
Steps:
- Complain in writing to the lender, citing failure to conduct adequate affordability checks
- If unresolved after 8 weeks, escalate to the Financial Ombudsman Service (free)
- The Ombudsman can order refunds of interest and charges, plus 8% simple interest on the refund
Thousands of successful complaints have been upheld against major payday lenders including Wonga (in administration), QuickQuid, and smaller operators.
If Payday Loan Debt Has Escalated
If you have multiple payday loans or the debt has grown to a size you cannot manage:
→ Debt Solutions hub UK — DMP, DRO, IVA, bankruptcy → Breathing Space UK — 60 days of legal protection while you get advice
FCA Rules on Payday Loan Rollovers and Caps
Since the FCA took over regulation of payday lenders in 2014, strict rules apply:
- Interest cap: 0.8% per day maximum (equivalent to £24 per £100 borrowed per month)
- Total cost cap: You can never repay more than double the original loan amount — so a £200 loan can never cost more than £400 in total
- Rollover limit: A lender can only rollover a payday loan twice. After two rollovers, the lender must offer a free repayment plan and provide information about free debt advice services
- Default fee cap: Maximum default charge is £15
These caps do not apply to longer-term loans (over 12 months) — only to short-term, high-cost credit. If you believe a lender has charged more than the cap allows, you can complain to the Financial Ombudsman Service (FOS).
Claiming Back Unaffordable Payday Loans
If a lender approved you for a payday loan without conducting proper affordability checks — or approved you for repeated loans when you were clearly in financial difficulty — you may be able to claim a refund of the interest paid.
This is known as an unaffordability complaint. The FCA requires lenders to check that borrowers can afford repayments without having to borrow again. Steps to claim:
- Write to the payday lender directly, setting out dates, amounts, and the fact that you were in financial difficulty when the loans were approved
- Request a refund of all interest and fees paid, plus 8% statutory interest
- If the lender refuses or does not respond within 8 weeks, escalate to the Financial Ombudsman Service — free and binding
- The FOS has upheld the majority of payday loan affordability complaints brought before it
Firms that have since gone into administration (Wonga, QuickQuid, WageDay Advance) have a claims process through their appointed administrators — check the administrator’s website for current deadlines.
Payday Loan Debt and Breathing Space
If you are struggling with payday loan debt alongside other debts, the Breathing Space scheme (formally: Debt Respite Scheme) gives you 60 days of protection from creditor action while you seek free debt advice. During Breathing Space:
- Creditors cannot contact you to collect debts
- Interest and charges are frozen
- No enforcement action can be taken
To access Breathing Space, contact a free debt advice service (StepChange, National Debtline, Citizens Advice) — they apply on your behalf. You cannot apply directly. The 60-day period gives you time to assess your full debt situation without the pressure of ongoing creditor contact or charges accumulating.
How a Payday Loan Default Affects Your Credit File
A missed payday loan payment can escalate quickly. The typical sequence:
- Missed payment — the lender attempts to collect via Continuous Payment Authority (CPA) and may try multiple times across the day, including for partial amounts
- Default notice — issued after 3–6 months of missed payments; gives you 14 days to pay before the default is registered
- Default registered on credit file — visible for 6 years from the default date; significantly damages your score and affects eligibility for mainstream credit
- Debt sold or transferred — the lender may sell the debt to a collection agency, which then contacts you directly
At any point, contact the lender proactively. Lenders who are FCA-regulated are required to treat customers in financial difficulty fairly — they must offer a repayment arrangement if you cannot repay in full.