Small-Loan Providers: Sent Back to the Fringe

Craig McMahon ()
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Craig McMahon: Villanova University

Chapter Chapter 5 in Taming the Fringe, 2021, pp 139-184 from Palgrave Macmillan

Abstract: Abstract Policymakers blamed a proliferation of ‘irresponsible’ lenders for issuing expensive loans that entrapped poor borrowers in a cycle of debt. The Consumer Credit Act 2006 required stringent licensing of high-risk lenders, sending small-loan providers back the fringe. By 2014, many believed that payday loans made the problems of poverty worse. Social justice concerns over economic fairness and the financial inclusion agenda guided the implementation of price controls on payday loans—a major and monumental reversal of government policy. What has changed is how policymakers understand poverty and how the state protects the working poor from certain kinds of finance. Price caps pushed lenders from the lowest end of the market. The verdict was clear: payday loans were harmful and marginal borrowers were better off without one.

Keywords: Financial inclusion; Financial exclusion; Payday loans; Pawnbrokers; Price caps (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:pal:psitcp:978-3-030-70615-9_5

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DOI: 10.1007/978-3-030-70615-9_5

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