How to regulate high cost credit markets

The Centre for Responsible Credit has taken a keen interest in the development of the UK’s regulatory approach to high cost credit markets for a number of years. In October 2010, we conducted a review of the policy debate and international approaches to regulation. This was then followed by an assessment of the Consumer Finance Association's Code of Practice for payday lenders published in July 2011, and a policy seminar to discuss the trends in payday lending regulation in the UK, US, Canada, and Australia in November 2011.

We have now updated our work in this area, reviewing the policy debate ahead of the transfer of consumer credit regulation from the Office of Fair Trading to the Financial Conduct Authority, which will take place in April 2014.

Our latest report, 'Tackling the high cost credit problem: the importance of regulatory databases' looks at evidence from 13 US states and argues for a real time database of high cost credit agreements to be established in the UK alongside improved responsible lending requirements, including caps on the total cost of credit. Further to this, we also look at how a database could be used to provide a more integrated offer of support to over-indebted borrowers and call on Government to establish a £50 million 'rescue fund' to help credit unions reschedule existing high cost credit loans and help people to put their finances on a long term sustainable footing.

Read our latest report 'Tackling the high cost credit problem: the importance of regulatory databases'

The 2011 briefing is available here.

Click here for the CfRC press statement concerning the CFA code of practice here.

The October 2010 review of the policy debate, which also includes a comparison of the cost of payday loans to overdraft and credit card borrowing, is available for download here.