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The Consumer Credit Act 1974 and the emergence of the APR as a consumer protection policy tool


  • Bernardo Batiz-Lazo

    () (Bangor University)

  • Santiago Carbo-Valverde

    () (CUNEF Colegio Universitario de Estudios Financieros
    Bangor University)

  • Sergio Castellanos-Gamboa



The ‘Crowther Committee’, in their report of 1971, proposed a fundamental change in consumer credit regulation in the UK. Among many aspects, they campaigned for the calculation and publication of the true cost of lending, i.e. the annualized percentage rate (APR), of all consumer credit products. The APR was introduced to reduce information asymmetries, thus improving consumers' rights and incentivizing competition among credit grantors. This report resulted in the enactment of the Consumer Credit Act 1974 (CCA74). This paper studies the effects of the CCA74 on the British economy, through the introduction of the APR. Moreover, it tests the presence of a structural break in the relationship between the price and volume of consumer credit. Furthermore, the paper analyses the effects of shocks to consumer credit on inflation and households’ savings. This article contributes to extending the data availability for consumer credit before 1975, and to debating the understanding of the role of consumer credit during a high-inflation period. There was evidence of a significant effect of the CCA74 on consumer credit, driven by the introduction of the APR. VAR models suggest that this law did not cause inflationary pressures, nor motivated households to dis-save, contrary to previous beliefs.

Suggested Citation

  • Bernardo Batiz-Lazo & Santiago Carbo-Valverde & Sergio Castellanos-Gamboa, 2019. "The Consumer Credit Act 1974 and the emergence of the APR as a consumer protection policy tool," Working Papers 19006, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).
  • Handle: RePEc:bng:wpaper:19006

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    Consumer Credit Act 1974; structural break; APR; United Kingdom; inflation; savings.;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-
    • N24 - Economic History - - Financial Markets and Institutions - - - Europe: 1913-

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