The Impact On Business And Consumers Of A Cap On The Total Cost Of Credit

Personal Finance Research Centre (2013). The Impact On Business And Consumers Of A Cap On The Total Cost Of Credit. Department for Business Innovation and Skills, London.



This research was commissioned to inform understanding of the likely impact on lenders and consumers of introducing a variable cap on the total cost of credit that can be charged in the short-to-medium term fixed-rate credit markets. The purpose of the research was not to make a recommendation to BIS on whether or not a cap should be introduced, but to provide an up-to-date evidence base that would help inform policy decision-making in this area.

The research covered home credit, pawnbroking, retail payday lending (carried out in-store) and online payday lending. It is the largest social research study of customers of high-cost credit carried out in the UK.

Six main issues associated with short-term credit were indicated by this research. Two relate to the cost of credit: the total charge for credit and default charges. The other four relate to affordability assessment; financial difficulty; multiple and repeat borrowing from short-term lenders; and loan renewals.

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