New rules introduced from January will mean payday lenders will not be able to claim back more than double the amount they originally lent.
The proposals made by the FCA are aimed at protecting people who use short-term credit.
It will mean interest and fees must not exceed 0.8 per cent a day of the amount borrowed, and default fees must be capped at £15.
There would also be a total cost cap of 100 per cent – meaning borrowers will not have to pay back more in interest and charges than double the amount borrowed.
The new measures will come into force on 2 January 2015 and will be reviewed after two years.