How to approach high-cost credit: beyond freedom and protection

Thesis

The regulation of consumer credit poses several challenges for governments; they need to ensure a fair balance between the enforcement of parties’ mutually agreed promises on one hand, and protection of consumers with lesser bargaining power on the other. This is a particularly important and difficult balance in relation to high-cost credit, commonly referred to as ‘payday lending’. These financial products have received considerable media attention recently, specifically concerning the challenges of regulating this type of lending. The public interest has not been replicated in the academic arena, and the subject remains relatively under-researched. There are two particular gaps of note. First, inadequate analysis of the relevant philosophical concepts which has resulted in an oversimplistic approach to regulation. Second, a lack of engagement in, and awareness of, the high-cost credit market and who are using these financial products. This thesis takes steps to fill both these gaps. The first section considers the concepts of freedom, protection and social minimums to gain a deeper understanding of high-cost credit. This involves an analysis of the three concepts, including their meaning, limitations, history and rationale, and examples of the concepts in our legal system. The thesis then utilises qualitative empirical research to develop an accurate and representative debtor profile. The research was conducted through a series of in-depth interviews with a wide range of people in the high-cost credit industry. The taxonomy developed from this research is used to evaluate the needs of each class of borrower, assess the role of the three relevant concepts, and analyse the appropriateness of current and past legal responses. The result of these steps is to raise a number of further relevant questions. The final section of the thesis therefore addresses these questions, recommending some initial practical steps and identifying what is necessary to take each forward.

Authors: Gardner, J

• DOI: 10.5287/ora-zb0erpr2p
• Type of award: DPhil
• Level of award: Doctoral
• Awarding institution: University of Oxford