Caps on payday loans will freeze out the most needy



Philip Booth comments on today’s Office for Budget Responsibility Fiscal Sustainability Report

Economic Theory

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Mark Littlewood comments on caps to be imposed on payday loans

Commenting on the announcement that the Financial Conduct Authority is to impose caps on payday loans, Mark Littlewood, Director General at the Institute of Economic Affairs said:

“Having the regulator set maximum interest rates and penalties for late payment will freeze out the most needy from the credit market.

“Payday loan companies will no longer be willing to lend to those judged to be at a fairly high risk of defaulting. Previously, these people could arrange a short term loan from legitimate businesses. As has been the experience in other countries, we can now expect more of them to turn to often viscous loan sharks that operate entirely outside the law. ”

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