Abstract: To cap or not to cap? Price controls, credit and the working poor

Craig M. McMahon

Abstract

In 2015, the UK Financial Conduct Authority imposed price caps on payday loans for the first time since the repeal of usury in 1854. Since 1900, politicians had rejected price controls on high-cost short-term credit at least eight times. This paper examines policymakers changing attitudes to controlling the working poor's access to credit by analysing three regulatory episodes: 1900-1927, 1974 and 2006-2015. It finds that policymakers have shifted their focus from market competition and freedom of consumer choice, toward economic inequality and financial exclusion. This evolution reframed the debate concerning price controls and facilitated their implementation in 2015. This research will be of interest to politicians, academics, lenders and charities interested in credit, economic inequality and financial exclusion.