What the HCSTC price cap is
The HCSTC price cap is a set of FCA rules that limits the cost of high-cost short-term credit. It is not a single rate; it is a package of caps covering daily interest, default fees and the total amount a borrower can repay.
The rules sit mainly in CONC 5A of the FCA Handbook. They work alongside wider consumer credit rules in CONC, including affordability checks and fair treatment requirements. The Consumer Credit Act 1974 also gives borrowers statutory protections.
The cap is not a product recommendation. It does not mean an HCSTC loan is suitable for everyone. It simply sets legal ceilings on certain charges. The cap is designed to reduce the risk of unaffordable costs while still allowing credit to be offered within clear limits. For a plain-language overview of the product type, see what instalment loans are.
Which loans are covered by the cap
Not every instalment loan is an HCSTC product. The FCA defines high-cost short-term credit by reference to the agreement's term and APR. In broad terms, it covers short-term credit at or above the APR threshold in the rules, with repayment due within the defined period.
Some agreements are excluded, such as certain overdrafts, home finance and other regulated credit listed in the rules. A lender should be able to confirm whether a particular agreement is HCSTC and therefore subject to the price cap. The definition is important because the price cap does not apply to every loan that is repaid in instalments.
If you are comparing products, read the pre-contract information and the credit agreement. The FCA's consumer credit pages explain the regulatory framework. You can also use our guide to how APR works to understand the cost measure used in the definition.
The three parts of the price cap
The price cap has three main elements. Each works differently, and a lender must apply all of them where they are relevant.
| Cap element | What it limits | Practical effect |
|---|---|---|
| Daily interest cap | Interest charged per day | Interest cannot exceed 0.8% of the amount borrowed per day. |
| Default fee cap | Fees for missed payments | Default fees are capped at £15, and interest can continue only within the daily cap. |
| Total cost cap | Total cost of credit | You should never repay more than 100% of the principal in interest, fees and charges. |
These figures are set out in the FCA's price cap rules in CONC 5A. They are ceilings, not targets. A lender can charge less, but it cannot lawfully charge more.
The caps are cumulative, not alternatives. A loan must comply with the daily interest cap, the default fee cap and the total cost cap at the same time. The total cost cap includes interest, default fees and other charges that fall within the rules. If a loan is not HCSTC, other FCA rules and the Consumer Credit Act still apply, but the specific HCSTC price cap may not.
How the daily interest cap works
The daily interest cap limits how much interest can build up each day. Under the FCA rules, interest is capped at 0.8% of the amount borrowed per day. That daily figure applies to the outstanding principal, not to a running balance that already includes interest.
Because the cap is daily, the length of the loan matters. A shorter loan has fewer daily interest charges. A longer HCSTC agreement can still accrue interest, but never above the daily cap, and the total cost cap provides an overall ceiling. The daily cap is calculated on the amount borrowed, so it is important to know the principal and the term.
The daily cap is about interest only. It does not authorise extra charges outside the rules. If you repay early, the lender should recalculate the amount owed. Our guide to early repayment of a loan explains how interest and settlement figures should work. The Consumer Credit Act 1974 also gives borrowers statutory early settlement rights.
Default fees and missed payments
If you miss a payment, the lender may charge a default fee. Under the price cap, a default fee is capped at £15. The lender cannot add default fees in a way that breaches the rules, and it cannot use default fees to bypass the total cost cap. A default fee is not a blank cheque; it is a regulated charge within the cap.
Interest may continue to accrue while the account is in arrears, but only within the daily interest cap. The total amount you repay, including default fees and interest, remains subject to the 100% total cost cap.
Missing a payment can also affect your credit file and lead to collection activity. Our guide to what happens if you miss a payment sets out the usual steps. If you are struggling, contact the lender and a free debt advice service early. The FCA expects firms to treat customers fairly and to consider forbearance.
The total cost cap
The total cost cap is the backstop. For HCSTC, you should not repay more than 100% of the principal in interest, fees and charges. In other words, if you borrow a sum, the total cost of credit is capped at the same amount.
This cap includes interest, default fees and other charges that fall within the rules. It prevents a short-term loan from becoming an open-ended debt. If a lender's calculation would take total charges above the cap, the excess cannot be charged. The total cost cap is separate from the daily interest cap, but it can be reached sooner if default fees are added.
The cap does not cover the principal itself, because that is the amount you borrowed. It also does not override your rights under the Consumer Credit Act 1974. You can read the Act on legislation.gov.uk. If you have already paid more than the cap allows, you may be able to reclaim the excess through the lender's complaints process or the Financial Ombudsman.
How to check a loan against the cap
Before you sign, use the pre-contract information and the credit agreement. Check the representative APR, the daily interest rate, the default fee terms and the total amount payable. The lender must give you clear information so you can compare costs. If the figures do not match the agreement, ask the lender to explain them in writing.
You can use this numbered checklist:
- Confirm the agreement is HCSTC, or ask the lender to confirm which rules apply.
- Check the daily interest rate against the 0.8% cap stated in CONC 5A.
- Check the default fee terms and the £15 cap.
- Add up interest, fees and charges, then compare the total cost of credit with the 100% cap.
- Read the early repayment terms and any settlement calculation.
- Check the lender is authorised on the FCA register.
Our total cost of credit calculator can help you see how charges add up. For a broader comparison method, see how to compare loans. Look at the total amount payable, not just the monthly payment.
If the cap is not followed or you need help
If you think a lender has charged more than the price cap allows, start by complaining to the lender. Keep copies of the agreement, statements and your calculation. The lender should investigate and respond under its complaints procedure.
If you are not satisfied, you can take the complaint to the Financial Ombudsman Service. The Financial Ombudsman Service can review complaints about consumer credit, including HCSTC. Our guide to complaining to the Financial Ombudsman explains the process.
If you are behind on repayments, free debt advice is available. GOV.UK lists options for dealing with debts. The price cap limits costs; it does not remove the need to manage repayments. The FCA's consumer pages also explain your rights and how to get support. Complaining does not stop you from seeking debt advice at the same time.