Payday loan rates 'to be limited'

The government is to change the law to allow restrictions to be imposed on the interest rates charged for so-called "payday loans".

Ministers are to amend the Financial Services Bill to give the planned Financial Conduct Authority the power to limit charges.

The news follows concerns over annual interest rates of up to 4,000%.

The government faced a possible House of Lords defeat on an amendment put down by a Labour peer over the issue.

BBC political correspondent Norman Smith said it was being suggested that there should not be a blanket cap on interest rates but the Financial Conduct Authority (FCA) would be able to investigate different loan schemes and then set a limit on the amount of APR charged.

Labour peer Lord Mitchell put down the amendment to the bill, which was also signed by Lord Welby, the incoming Archbishop of Canterbury.

Lord Welby called the most costly loans "usury", saying that curbing them was a "moral" issue.

There are concerns that small loans, intended to be short-term, have become prohibitively expensive, and in some cases ruinous, if not rapidly repaid.

The government has now agreed instead to introduce its own amendment to the bill next Wednesday.