Credit unions can't charge more than 26.8% for a loan (by law), a far cry from the thousands of % charged by payday lenders.

From today there’s a change in the rules that gives credit unions - which are community based providers of loans and savings - a bit more flexibility about how they operate. Now they can offer interest on savings, and businesses and organisations as well as individuals will be able to join. But while these changes will make savings accounts more attractive, many people use credit unions for loans.

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Banks will have to make charges for overdrafts clearer and store cards won’t be able to offer upfront discounts.

Shops won’t be able to offer upfront discounts and incentives for people who sign up to store cards in the future and staff who sell them won’t be paid by direct commission. That’s the good news. The bad news is that banks won’t be forced to cut overdraft charges but instead can sign up to a voluntary agreement to send customers an annual statement on their overdraft costs.

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Payday loans promise easy access to cash for short periods. But they can charge £80 for a £300 loan for a month.

Updated 7th December 2011
According to a survey by R3, around three million people are expected to take out a payday loan in the next six months. The payday loans industry disputes the figure, saying only a million people have payday loans. However, there's no doubt that business is booming. It’s in part due to the rapid growth in the number of online payday loans providers, which promise an almost instant decision on your loan (and money in your account in less than an hour).

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