Payday loan firms escape cap on their sky-high interest rates as Government launches crackdown Controversial industry faces unlimited fines for breaking new rules But firms will escape statutory cap of their rates Millions turned to new loan companies after credit from banks dried up By Gerri Peev Payday loan companies are to escape a cap on exorbitant interest rates, but will face unlimited fines for breaking new rules under a government clampdown Payday loan companies are to escape a cap on their exorbitant interest rates, which can reach more than 4,000 per cent a year. They will face unlimited fines for breaking new rules under a government clampdown of the controversial industry. But the firms - dubbed legal loan sharks - will escape a statutory cap of their rates amid claims that it would only drive desperate families into the arms of overseas lenders. Millions of families have turned to new loan companies after credit from banks dried up in the wake of the recession. But critics say some firms run by "cowboys" are exploiting vulnerable consumers with their extortionate interest rates. The Treasury and Department for Business will today unveil more protection for customers. A new watchdog, the Financial Conduct Authority, will come into force next year and will have the power to impose unlimited fines and get consumers" money back if rules are breached. The Government will also today publish a study from the University of Bristol which will lay bare the harm caused by payday lenders while also dismissing the practicalities of imposing a cap. The Mail understands the independent report will say that a cap on interest rates would drive consumers to seek loans from firms based abroad. But a consultation on the powers of the new watchdog will not rule out allowing it to impose a cap on interest rates in future. The Government is expected to announce that payday lenders will face new rules on how they advertise. Some lenders are already accused of targeting parents by advertising during children's TV programmes. The industry will face limits on the number of adverts in an hour, the times they advertise and will have to make clear that their APR - their annual interest rate - is properly displayed. Lenders will also be made to confidentially share data on applications so people can't take out several loans at once from different companies. Economic Secretary to the Treasury, Sajid Javid, said: "Consumers can have greater confidence that the new FCA will intervene early and decisively in their interests - thanks to its more focused remit, objectives and powers." Millions of families have turned to new loan companies after credit from banks dried up in the wake of the recession Payday loan bosses have previously dismissed complaints about their huge interest rates, arguing that most consumers take out the loans for a only short time and that they are filling a gap in the market. Government sources said that ministers are determined to bring the industry to book and will make sure that it fully obeys the law and codes of practice already in place. Today the Office of Fair Trading will publish the results of an investigation into how well payday lenders comply with the law. Other countries do restrict payday lenders" interest rates. Australia has imposed a 48 per cent annual interest rate cap on its industry while 35 American states have limits on fees and interest rates. Payday lenders in Canada can charge interest at up to 60 per cent a year. Some campaigners say a cap on interest rates alone would be a blunt instrument and make it so unprofitable that some customers would turn to illegal loan sharks. Instead, they have called for a cap on the total cost of a loan, so that people who are forced to roll over their debt into a longer-term loan do not face crippling costs.