What the cost cap covers
The Financial Conduct Authority (FCA) sets price-cap rules for high-cost short-term credit (HCSTC) in the Consumer Credit sourcebook (CONC 5A). The rules are designed to limit interest, fees and default charges on products that meet the HCSTC definition — often described in everyday language as payday or similar short-term loans.
Not every small loan is HCSTC. Membership-style credit, credit cards, overdrafts and mainstream personal loans have different rulebooks. Always check the product type.
The three parts of the cap
FCA Policy Statement PS14/16 and CONC 5A describe three components. Figures below are taken from those primary sources. Checked 19 September 2026. Confirm the live handbook before relying on a number, because rules can be amended.
Initial cost cap: interest and fees must not exceed 0.8% of the outstanding principal per day during the agreed loan (CONC 5A; PS14/16).
Default cap: default fees are limited to £15, with interest on those charges also capped at the same daily rate in the policy statement.
Total cost cap: total interest, fees and charges must not exceed 100% of the amount borrowed, so someone should not repay more than twice the original principal in charges.
What the cap does not mean
A cap is a ceiling, not a typical price and not a recommendation. Credit that sits under the cap can still be expensive. Affordability rules still apply. The FCA has reviewed the cap and, as of its high-cost short-term credit page updated 25 June 2026, described work to consider whether the level should change — check that page for the latest status.
Sources and check date
Primary sources: FCA Handbook CONC 5A; FCA Policy Statement PS14/16 (November 2014); FCA “High-cost short-term credit” firm page (first published 22 July 2019, page updated 25 June 2026). Checked 19 September 2026. This guide is information, not legal advice.