Will tougher regulation on payday lending restrict credit access for the most vulnerable?

YES
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.
No
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.

Philip Booth

Philip Booth
Philip Booth

Philip Booth is professor of insurance and risk management at Cass Business School, and editorial and programme director at the Institute of Economic Affairs.

Thursday 24 July 2014
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Tuesday 03 June 2014
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Monday 12 May 2014
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Wednesday 30 April 2014
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Thursday 27 March 2014
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Tuesday 07 January 2014
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Wednesday 18 December 2013
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Thursday 31 October 2013
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Monday 16 September 2013
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Friday 23 August 2013
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Tuesday 16 July 2013
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Thursday 23 May 2013
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Wednesday 10 April 2013
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Wednesday 27 March 2013
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Friday 15 March 2013
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Tuesday 12 February 2013
THOSE who study Pope Benedict, who announced his retirement yesterday, have been impressed by his humanity and by his understanding of human nature. Statements he has made on the economy, written in his own hand, reflect that.
Friday 01 February 2013
BANKS are embroiled in another “mis-selling” scandal, but we can be sure that customer behaviour won’t be affected. Few people will switch bank as a result. Regulation means we are indifferent to how our banks behave. Why?
Tuesday 08 January 2013
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