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Small-Loan Providers: Sent Back to the Fringe

In: Taming the Fringe

Author

Listed:
  • Craig McMahon

    (Villanova University)

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.

Suggested Citation

  • Craig McMahon, 2021. "Small-Loan Providers: Sent Back to the Fringe," Palgrave Studies in the History of Finance, in: Taming the Fringe, chapter 0, pages 139-184, Palgrave Macmillan.
    • Handle: RePEc:pal:psitcp:978-3-030-70615-9_5
    DOI: 10.1007/978-3-030-70615-9_5
    as

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