By Jonathan Davies

A cap on the cost of payday loans has come into effect today (Friday), enforced by the City regulator, the Financial Conduct Authority (FCA).

The cap means that no-one will have to pay back more than double the amount they borrowed, with interest rates capped at 0.8% per day.

The FCA said those who are unable to repay the debt should be stopped from taking out a loan in the first place.

The new rules have already led to a number of payday lenders closing down, according to Consumer Finance Association, a trade body for payday lenders.

Russell Hamblin-Boone, from the trade body, said: "There will be fewer people getting loans from fewer lenders and the loans they get will no longer be the single payment loans for less than 30 days.

"The loans that are available now will be for three months or more and they will be at slightly higher values as well. Very few loans will be rolled over."

Christopher Woolard, of the FCA, said the regulator had taken action because people were being forced into unmanageable debt.

"For those people taking out payday loans, they should be able to borrow more cheaply from today, but also we make sure that people who should not be taking out those loans don't actually get them," he said.

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