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

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.

Philip Booth

Philip Booth is professor of finance, public policy and ethics at St Mary’s University, Twickenham, and editorial and programme director at the Institute of Economic Affairs.


Tuesday 21 July 2015
When the euro was adopted, British sceptics argued that it was impossible to have a single currency without a single country. They suggested that you need central control of fiscal policy to stop governments from borrowing too much.
Monday 13 July 2015
Philip Booth, a professor at St Mary’s University, Twickenham, and editorial and programme director at the Institute of Economic Affairs, says Yes.
Tuesday 02 June 2015
Would anybody ever be brave enough to oppose “corporate social responsibility”? Certainly, it is a good marketing strapline.
Tuesday 26 May 2015
There is no shortage of commentators who blame Margaret Thatcher’s supposed deregulation of the City for the crash of 2008. But surely it is unreasonable to blame her for events that happened nearly 30 years after 1979.
Petrol prices
Tuesday 19 May 2015
Today, it was announced that the UK is in a period of deflation. It will almost certainly be a brief period.  
Wednesday 18 March 2015
WHENEVER we approach a General Election or Budget, the competition for the daftest tax policy idea is always intense. The current front-runner is probably the proposal to largely exempt houses from Inheritance Tax.
Friday 30 January 2015
Philip Booth, a professor at Cass Business School, and editorial and programme director at the Institute of Economic Affairs, says Yes
Monday 19 January 2015
Philip Booth, professor at Cass Business School and editorial and programme director at the Institute of Economic Affairs, says Yes.
Monday 08 December 2014
BRITAIN has just celebrated “Small Business Saturday”. Perhaps yesterday should have been declared “Multinational Monday”.
Thursday 27 November 2014
Philip Booth, professor of insurance and risk management at Cass, and editorial and programme director at the Institute of Economic Affairs, says Yes.
Monday 24 November 2014
FALL-OUT from the Autumn Statement next week is likely to focus heavily on the slowdown in deficit reduction.
Wednesday 08 October 2014
THE LIBERAL Democrats have proposed raising capital gains tax (CGT) rates in order to reduce taxes on the least well off. Go to the back of the class! CGT is a bad tax implemented badly. There is no more revenue to be raised.
Wednesday 17 September 2014
In denying the Scots the option of devo-max on the ballot paper today, David Cameron made arguably the most monumental mistake of any recent premiership. And whatever the result of the referendum, that mistake cannot be undone.
Tuesday 19 August 2014
Colin Stanbridge, chief executive of the London Chamber of Commerce, says Yes.
Monday 18 August 2014
PROPONENTS of Bitcoin like to suggest that it will be the money of the future. Critics point to its price volatility, evidence of a Bitcoin bubble and other problems.
Thursday 24 July 2014
There is no shortage of concern about the UK’s large balance of payments deficit. Many in the government are trying to solve it by cajoling British companies to export more with lots of new fancy schemes and initiatives.
Tuesday 03 June 2014
IN THE Queen’s Speech today, the government is likely to give the go-ahead for large pension schemes along Dutch lines. Such collective defined contribution schemes have many advantages.
Monday 12 May 2014
NO MAJOR UK political party is interested in a radical decentralisation of power. The Conservatives, in particular, are scarred by their experiences of “loony-left” councils in the 1980s, and we certainly don’t want to go back to those days.
Wednesday 30 April 2014
TWO fallacies are common in the EU debate. One is the “nirvana fallacy”, the idea that, if we leave the EU, we will have optimal policy at home.
Thursday 27 March 2014
IT IS not entirely unwelcome that the energy industry has been referred to the Competition and Markets Authority (CMA) by Ofgem. It may lance a festering boil; it may do some good.


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