The impact on business and consumers of a cap on the total cost of credit

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.

Main report

The impact on business and consumers of a cap on the total cost of credit (PDF, 1,917kB)

Additional volumes

The impact on business and consumers of a cap on the total cost of credit - Appendix tables (PDF, 2,071kB)
The impact on business and consumers of a cap on the total cost of credit - Consumer Survey questionnaire (PDF, 748kB)
The impact on business and consumers of a cap on the total cost of credit - Technical appendix (PDF, 599kB)
The impact on business and consumers of a cap on the total cost of credit - An analysis of the Wealth and Assets Survey (PDF, 1,428kB)

Case study

Drawing partly on an analysis of the 2006-2008 Wealth and Assets Survey, the research has been used as a case study for the UK Data Archive.

Andrea Finney (2013) High-cost credit: What’s the wider cost to consumers? (Link to UK Data Archive site)