The evidence suggests that the regulation of consumer credit markets leads people who need temporary access to finance to use products that are unsuitable. The restriction of consumer credit also exposes those who take out less suitable forms of finance to complete financial breakdown. The criticisms of the consumer credit industry are exaggerated and, largely, display ignorance of the reasons why consumers access short-term lending. The measures proposed by the Financial Conduct Authority are innocuous enough on their own. But statutory regulation prevents the market from developing its own regulatory institutions, and leads the industry to become answerable to a regulatory bureaucracy, not its customers. Statutory regulation of the financial services industry has mushroomed since 1986 and has failed dismally. Scandals have not been reduced and consumers are not better served. Philip Booth is editorial and programme director at the Institute of Economic Affairs.
The publication of the Financial Conduct Authority’s (FCA) rule book is an important milestone for the consumer credit industry. As major lenders in the mainstream credit market, responsible payday lenders already meet high, independently monitored standards. They have no desire to lend to customers who aren’t going to pay them back – it simply makes no sense. Our members are here to stay – they are committed to providing a valued and responsible product and a high-quality customer experience. We are firmly behind the FCA and its plans to drive out unscrupulous lenders that do lend to vulnerable customers – people who know that they can’t afford to repay, even before they have applied. But we don’t hold the view that the new rules will restrict access to credit through the major lenders, because anyone who doesn’t meet the robust affordability assessment criteria already in place won’t get a loan from one of our members – now or in April. Russell Hamblin-Boone is chief executive of the Consumer Finance Association.