The UK New Regulatory Framework of High-Cost Short-Term Credit: Is There a Shift Towards a More “Law and Society” Based Approach?

In the wake of the 2008 financial crisis, the consumer credit market in the UK has witnessed a proliferation in the number of high-cost short-term credit (HCSTC) providers promising easy access to credit without the complications of credit history. This act of generosity came at a very high price, which on some occasions reached 4000% APR. After refusing for many years to interfere with the credit price and other aspects of the HCSTC business’ practices, the Government since 2014 started to impose certain regulatory restrictions on the sector including a cost cap, January 2015, on what HCSTC providers can charge. This article argues that the FCA’s credit cost cap and other regulatory measures taken since 2014 signify an important shift in the regulatory approach to HCSTC. It argues that the neoliberal ‘law and economics’ theoretical paradigm is no longer the foundation of the regulatory framework. Instead, the Government has shifted towards a Polanyian ‘law and society’ based approach, which is attentive to the vulnerability of HCSTC consumers and consequently more capable of protecting them. This article concludes by arguing how this newly adopted approach can be further advanced.