Payday lending still exists in the UK, although the Financial Conduct Authority generally uses the term high-cost short-term credit (HCSTC) for the regulated category that includes many payday-loan products.
For lenders, accepting and collecting card payments can create a more specialist payment requirement than a conventional ecommerce or retail business.
The challenge is not simply finding a provider that can process a debit card.
A payment provider may also need to understand:
- the lender's FCA permissions;
- the type of credit offered;
- how customers apply and are assessed;
- how repayments are collected;
- whether continuous payment authorities are used;
- transaction values and volumes;
- refund and complaint processes;
- chargeback exposure;
- customer geography; and
- the lender's wider regulatory and compliance framework.
Not every acquiring bank or payment provider supports high-cost short-term credit businesses, so provider suitability should be established before assuming a standard merchant account will work.
This guide explains how card processing can work for payday lenders and HCSTC firms, why underwriting can be more detailed, and what businesses should compare when looking for a payment provider.
What is high-cost short-term credit?
The FCA uses high-cost short-term credit as a specific regulatory definition.
Broadly, it covers certain regulated unsecured credit agreements where:
- the APR is 100% or more;
- the credit is promoted as short term or is due to be repaid, or substantially repaid, within 12 months; and
- the agreement does not fall within specified excluded categories.
The regulatory definition is more precise than the everyday term “payday loan”.
A lender should therefore establish which FCA rules apply to its particular credit product rather than relying purely on how the product is marketed.
Businesses carrying on regulated consumer-credit lending activities in the UK generally need the appropriate FCA authorisation and permissions.
Are payday loans still regulated by a price cap?
Yes.
The FCA introduced its HCSTC price cap in January 2015 and continues to apply specific rules to this part of the credit market.
The cap has three main elements:
- initial costs: interest and fees must not exceed 0.8% per day of the amount borrowed;
- default charges: fixed default fees must not exceed £15; and
- total cost: fees and interest must not exceed 100% of the amount originally borrowed.
This means a borrower should not ultimately pay more in interest and charges than the amount borrowed.
The FCA confirmed in 2026 that it was reviewing the price cap but, at that point, said it had not identified evidence supporting a change.
Payment providers assessing a lender may therefore want to understand not only the payment flow, but the wider regulatory model behind it.
Why can payday lenders need specialist merchant accounts?
Payment-provider risk appetite varies.
A provider may be comfortable processing conventional retail transactions but unwilling to support consumer lending or high-cost credit.
This can be because the payment-provider relationship involves factors that are less common in ordinary retail, including:
- regulated lending activity;
- customer affordability considerations;
- repayment collection rather than conventional product sales;
- continuous payment authorities;
- complaint and dispute exposure;
- chargebacks;
- financial-promotion requirements;
- customer vulnerability considerations; and
- reputational and regulatory risk.
This does not mean every HCSTC business presents the same risk.
An established lender with appropriate permissions, transparent customer journeys, documented compliance processes and a strong processing history may present a very different underwriting profile from a newly formed business.
Provider decisions are made individually.
Looking for a merchant account for a lending business?
Tell us about the business, your FCA status, how repayments are collected and your current or expected card-processing volumes.
Merchant Advice Service can use those requirements to help identify payment providers that may be willing to consider the business.
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Will a payment provider check FCA authorisation?
For a UK regulated consumer lender, this can be a fundamental part of underwriting.
The FCA states that firms wishing to carry on regulated activities as consumer-credit lenders need the appropriate authorisation.
A payment provider may therefore ask for information including:
- FCA firm reference number;
- relevant permissions;
- legal entity details;
- directors and beneficial owners;
- business plan;
- credit products offered;
- customer eligibility;
- website and application journey;
- terms and conditions;
- complaints information;
- repayment methods; and
- processing history where available.
A payment provider approving a merchant account does not replace FCA authorisation, and FCA authorisation does not guarantee that an acquirer will accept the business.
They are separate assessments.
How do card payments work for payday loan repayments?
A lender may use debit-card payments as one method of collecting amounts due under a credit agreement.
Payments might include:
- scheduled repayments;
- a final repayment;
- a customer-initiated one-off payment;
- an agreed payment following customer contact; or
- payments collected under a continuous payment authority where the relevant requirements are met.
The payment provider needs to understand the distinction between a normal customer-initiated card transaction and a merchant-initiated recurring collection.
This can affect:
- gateway configuration;
- stored credentials;
- tokenisation;
- transaction indicators;
- customer consent;
- retry logic; and
- reporting.
The lender also remains responsible for ensuring its repayment practices comply with the regulatory requirements applying to the credit agreement.
What is a continuous payment authority?
A continuous payment authority, often shortened to CPA, allows a business to take recurring payments from a customer's payment card under an agreed authority.
The FCA notes that CPAs can be used for short-term loan repayments, but specific consumer-credit rules govern how lenders exercise them.
For HCSTC, this is particularly important.
The FCA's Consumer Credit sourcebook contains rules governing:
- how a CPA is explained to the customer;
- how it may be exercised;
- changes to the authority;
- reasonable and proportionate collection activity;
- failed collection attempts; and
- attempts to take partial payments.
For example, FCA rules restrict further CPA requests after two previous requests have been refused in connection with the same HCSTC agreement, subject to specific provisions and exceptions.
Separate rules apply where the loan is repaid in instalments.
This means a lender cannot simply configure its gateway to retry a failed debit-card collection indefinitely.
The technical payment setup needs to reflect the regulatory rules governing the underlying credit agreement.
Can payday lenders take partial payments from a customer's card?
The answer depends on how the payment is being collected.
FCA rules place restrictions on using a continuous payment authority to collect less than the full amount due for HCSTC, subject to specific circumstances such as an agreed repayment plan.
That does not mean a lender can never accept a customer-initiated part payment using another payment method or a separately authorised transaction.
This distinction matters when designing payment workflows.
A gateway or processor may technically be capable of attempting different transaction amounts, but the lender remains responsible for ensuring that the way the facility is used complies with FCA rules.
Do payday lenders need a specialist payment gateway?
Potentially.
A merchant account and payment gateway perform different roles.
The merchant account or acquiring relationship enables the business to process card payments and receive settlement.
The gateway provides the technical connection through which online card transactions can be submitted.
A lender may therefore need both:
customer or internal payment system → payment gateway → acquirer/processor → card network → card issuer.
Compatibility is important.
A gateway may offer excellent technical functionality but be of little use if the acquiring provider behind the transaction does not support HCSTC.
Equally, an acquirer may be willing to consider the business but require use of particular gateway or transaction functionality.
You can explore payment gateway providers, but provider acceptance should be confirmed specifically for the lending model concerned.
What will a payment provider assess?
Specialist merchant-account underwriting is usually more detailed than completing an online application and supplying a bank account.
Depending on the provider, areas reviewed may include:
Regulatory status
The provider may verify FCA authorisation, permissions and company information.
Business ownership
Directors, shareholders and ultimate beneficial owners may be reviewed as part of standard KYB and underwriting checks.
The lending product
The provider may want to understand loan size, duration, repayment structure, customer profile and whether the product falls within HCSTC rules.
Payment collection
Underwriters may ask how card details are obtained, how CPAs are authorised and how failed repayments are handled.
Processing history
An existing lender may be asked to provide merchant statements showing volumes, refunds, chargebacks and previous processing performance.
Website and customer journey
The provider may review the application process, pricing, terms, disclosures, complaints information, regulatory details and repayment journey.
Customer geography
The location of the lender and its customers can influence acquiring options.
Complaints and disputes
High levels of complaints, chargebacks or regulatory issues can affect provider appetite.
Your website can affect merchant-account approval
For regulated lending businesses, the website is likely to form an important part of payment-provider underwriting.
A provider may review whether the site clearly identifies:
- the legal business name;
- contact details;
- FCA status where applicable;
- the credit product;
- repayment terms;
- cost information;
- customer terms and conditions;
- privacy information;
- complaints procedures;
- cancellation or withdrawal information where relevant; and
- how customers make or manage repayments.
A lender should not change regulatory wording purely to satisfy a payment provider without considering the FCA requirements applying to its business.
Where there is uncertainty, appropriate legal or compliance advice may be required.
Chargebacks and card disputes for lenders
A cardholder can dispute certain card transactions through their issuing bank.
A chargeback is not the same thing as a customer complaint under the lender's FCA-regulated complaints process, although the same underlying transaction may sometimes result in both.
From the payment provider's perspective, chargeback levels can form part of the risk assessment.
A lender should therefore maintain clear records relating to:
- the customer agreement;
- payment authority;
- transaction amount;
- payment date;
- customer communications;
- refunds;
- repayment arrangements; and
- any subsequent dispute.
The exact evidence required for a card dispute will depend on the transaction and the relevant card-scheme process.
Will a payday lender have a rolling reserve?
Possibly, but a reserve should not be assumed.
Merchant-account providers can apply different risk controls depending on the individual business.
These might include:
- standard settlement;
- delayed settlement;
- a rolling reserve;
- transaction or volume limits;
- additional monitoring; or
- other commercial conditions.
The provider may consider factors such as processing history, chargebacks, business maturity, transaction profile and overall underwriting risk.
Do not compare providers purely on the transaction rate without also understanding how and when funds will be settled.
Declined by a payment provider?
A decline from one acquirer does not automatically mean every provider will reach the same decision, but the reason for the decline matters.
Tell us about the business, its regulatory status, processing history and previous provider. We can help determine whether there are providers whose risk appetite may be more appropriate.
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What if a payday lender has been declined or terminated?
First establish why.
A payment provider may decline or terminate a merchant for a wide range of reasons, including:
- sector risk appetite;
- regulatory concerns;
- changes to the business model;
- chargeback levels;
- processing activity outside the original application;
- website or compliance concerns;
- ownership changes;
- customer geography;
- transaction patterns; or
- the provider simply no longer supporting the sector.
Applying repeatedly to providers without addressing the underlying issue may not improve the outcome.
When approaching another provider, disclose previous processing history accurately and provide context where required.
Our broader guide to high-risk merchant accounts explains how specialist underwriting can differ from mainstream merchant-account applications.
How much does card processing cost for a payday lender?
There is no standard transaction rate for HCSTC businesses.
Pricing depends on the individual provider and underwriting profile.
Costs might include:
- transaction fees;
- interchange and card-scheme costs;
- acquirer margin;
- gateway charges;
- authorisation fees;
- monthly fees;
- chargeback fees;
- refund-related charges;
- PCI-related costs; and
- other account or integration fees.
Higher-risk underwriting can also affect settlement conditions or reserve requirements.
A meaningful comparison therefore needs to look at the complete commercial arrangement, not just one percentage.
What should payday lenders compare between payment providers?
Start with provider appetite.
There is little value negotiating an attractive rate with a provider that ultimately cannot support the business model.
Sector acceptance
Confirm that the provider is willing to consider regulated consumer lending and specifically the type of credit being offered.
Card repayment functionality
Check whether the processor and gateway can support the required customer-initiated and merchant-initiated payment flows.
Continuous payment authorities
If CPAs are used, establish whether the technical setup supports the lender's compliant collection process.
Gateway integration
Determine how the payment service connects to the lender's website, loan-management platform or internal systems.
Settlement
Compare settlement time, reserves and any other funding conditions.
Pricing
Compare the total cost rather than a headline card-processing percentage.
Reporting
The business should be able to reconcile repayments to individual customer accounts accurately.
Support
Specialist businesses may benefit from a provider that understands the sector rather than relying entirely on generic support processes.
How Merchant Advice Service helps lending businesses
Merchant Advice Service is an independent payments information and provider-matching service.
We are not an FCA regulator, lender, acquiring bank or payment processor.
We do not determine whether a payday lender is compliant with FCA rules and we cannot guarantee that a payment provider will accept a business.
Our role is to understand the payment requirement and use that information to help identify providers whose services and risk appetite may be relevant.
For an HCSTC or payday-lending enquiry, useful information can include:
- legal entity;
- FCA status and permissions;
- type of lending;
- time trading;
- monthly processing volume;
- average repayment value;
- customer location;
- how repayments are collected;
- whether CPAs are used;
- current payment provider;
- chargeback history;
- previous declines or terminations;
- gateway and technical requirements; and
- anything that needs to change under the next arrangement.
We can then help narrow down payment providers that may be willing to consider the business.
You can also browse merchant account providers or read more about specialist high-risk payment processing.
Find a payment provider for your lending business
Tell us about your regulatory status, payment volumes, repayment methods and current processing setup.
Merchant Advice Service can use that information to help identify providers that may be suitable for further discussion.
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Editorial & Commercial Disclosure
This article explains payment-processing considerations for high-cost short-term credit and payday-lending businesses. It is not legal, regulatory or compliance advice.
Consumer-credit businesses are responsible for understanding and complying with the FCA rules and permissions applying to their own activities. Regulatory requirements can depend on the specific product, agreement and circumstances.
Merchant Advice Service is an independent payments information and provider-matching service. MAS is not the Financial Conduct Authority, an acquiring bank, payment processor or lender and cannot determine whether a business complies with consumer-credit regulation.
There is no single merchant-account provider that is suitable for every lending business. Provider risk appetite, underwriting, pricing, reserves, settlement and technical requirements vary.
MAS may receive a referral fee or commission from some payment providers where a business proceeds following an introduction. Commercial relationships do not determine the factual information or provider-selection principles contained within this guide.
Final merchant-account approval, pricing, settlement and contractual terms remain the responsibility of the relevant payment provider.
