The Future of High-Cost Credit

Rethinking Payday Lending

Dr Jodi Gardner

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Hardback

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English

Hart Publishing
14 July 2022

Comparative law; Law & society; Banking law; Consumer protection law

Series: Hart Studies in Commercial and Financial Law

This book proposes a new way of thinking about the controversial and complex challenges associated with the regulation of high-cost credit, specifically payday lending. These products have received significant attention in both the media and political arena. The inadequacy of regulatory interventions has created ongoing problems with the provision of high-cost credit, particularly for consumers with lesser bargaining power and who are already financially vulnerable.

The book tackles two specific gaps in the existing literature. The first involves inadequate analysis of the relevant philosophical concepts around high-cost credit, which can result in an over-simplification of what are particularly complex issues. The second is a lack of engagement in both the market and lived experience of borrowers, resulting in limited understanding of those who use these financial products.

The Future of High-Cost Credit explores the theoretical grounding, policy initiatives and interdisciplinary perspectives associated with high-cost credit, making a novel and insightful contribution to the existing literature. The problems with debt extend far beyond the legal sphere, and the book will therefore be of interest to many other academic disciplines, as well as for those working in public policy and ‘the third sector’.

By: Dr Jodi Gardner
Imprint: Hart Publishing
Country of Publication: United Kingdom
Dimensions: Height: 234mm, Width: 156mm,
ISBN: 9781509939350
ISBN 10: 1509939350
Series: Hart Studies in Commercial and Financial Law
Pages: 264
Publication Date: 14 July 2022
Audience: Professional and scholarly , Undergraduate
Format: Hardback
Publisher's Status: Active

1. Introduction 1.1. Payday Problems 1.2. Why High-Cost Credit? 1.3. Method, Scope and Jurisdiction 1.4. Outline PART I PHILOSOPHICAL CONTEXT: THE CONCEPTS OF HIGH-COST CREDIT 2. High-Cost Credit in the UK 2.1. How is High-Cost Credit Regulated? 2.1.1. The History of Moneylending Regulation 2.1.2. The Office of Fair Trading 2.1.3. The Financial Conduct Authority 2.1.4. Non-Regulatory Legal Enforcement 2.1.5. What Can We Learn? 2.2. What are the Challenges to Regulation? 2.2.1. Victim Blaming 2.2.2. Inadequate Engagement with the Market 2.2.3. What Can We Do? 2.3. Conclusion 3. Freedom 3.1. What is Freedom? 3.2. The History of Freedom 3.3. Justifying Freedom 3.3.1. Consent 3.3.2. Human Rights Approaches 3.3.3. Responsibilisation and Financialisation 3.3.4. Differing Approaches to Financial and Physical Products 3.4. Examples of Freedom 3.4.1. Restrictions on Who Can Lend 3.4.2. Disclosure Obligations and Advertising Restrictions 3.4.3. Cooling-Off Rights 3.4.4. Unfair Relationship Test 3.4.5. Vitiating Factors 3.5. Limitations of Freedom 3.5.1. Failure of Disclosure 3.5.2. Lack of Meaningful Choice 3.5.3. Poverty 3.6. Conclusion 4. Regulation 4.1. What is Regulation? 4.2. The History of Regulation 4.2.1. Usury, Religion and High-Cost Credit 4.2.2. The Development of Regulation 4.2.3. What Can We Learn? 4.3. Explanations for Regulation 4.3.1. Preventing Harmful Outcomes 4.3.2. Stopping Unconscionable Behaviour 4.3.3. Defending the Vulnerable 4.4. Examples of Regulation 4.4.1. Amending or Prohibiting Contract Terms 4.4.2. Prohibiting or Limiting Interest 4.4.3. Responsible Lending Obligations 4.4.4. Unfair Terms Legislation 4.4.5. Common Law Protections 4.5. Limitations of Regulation 4.5.1. Overlap with Limitations of Freedom 4.5.2. Illegal Lending 4.5.3. Financial Exclusion 4.6. Conclusion 5. A Social Minimum 5.1. What is a Social Minimum? 5.2. The History of A Social Minimum 5.2.1. Religious and Charitable Obligations 5.2.2. The Poor Laws 5.2.3. The Beveridge Report 5.2.4. After the ‘Welfare State’ 5.3. Explanations for a Social Minimum 5.3.1. Equality and Liberal Democracy 5.3.2. Government Duty 5.3.3. Social Minimum and Happiness 5.4. Examples of a Social Minimum Provision 5.4.1. Welfare Provision 5.4.2. Bankruptcy Relief 5.4.3. Vitiating Factors 5.5. Limitations of a Social Minimum 5.5.1. Impact on Property Rights 5.5.2. Responsibility for the Social Minimum 5.5.3. Moral Hazards 5.6. Conclusion PART II THE SOCIAL CONTEXT: IDENTIFYING HIGH-COST CREDIT BORROWERS 6. The Lived Experience 6.1. Research Method and Results 6.1.1. Methodology of Stakeholder Interviews 6.1.2. Methodology of Borrower Interviews 6.1.3. Interview Results 6.2. Financially Secure Borrowers 6.2.1. Lending Scenarios 6.2.2. Application to High-Cost Credit Concepts 6.2.3. Application to Current Legal Approach 6.3. Financially Insecure Borrowers 6.3.1. Lending Scenarios 6.3.2. Application to High-Cost Credit Concepts 6.3.3. Application to Current Legal Approach 6.4. Significantly Impaired Borrowers 6.4.1. Lending Scenarios 6.4.2. Application to High-Cost Credit Concepts 6.4.3. Application to Current Legal Approach 6.5. Conclusion 7. Future Directions 7.1. Law Reform Recommendations 7.1.1. Enhanced and Meaningful Disclosure 7.1.2. Responsible Lending Obligations 7.1.3. Opt Out Processes 7.2. Social Welfare Responses 7.2.1. Providing a Social Minimum 7.2.2. Maintaining a Social Minimum 7.3. Further Research 8. Conclusion

Jodi Gardner is Fellow of Law at St John’s College, University of Cambridge, UK.

Reviews for The Future of High-Cost Credit: Rethinking Payday Lending

In a world of increasingly insecure work and runaway inflation, the regulation of payday loans is a central policy priority. The challenge is complex, requiring a broad, interdisciplinary understanding not only of current legal regimes, but also their history, political economy, and lived reality. In this pathbreaking book, Dr Jodi Gardner brilliantly draws on these perspectives to provide urgently required directions for reform. * Jeremias Adams-Prassl, Professor, University of Oxford, UK * This theoretically and empirically rich analysis of high-cost credit provides a clear argument for both regulatory and broader welfare approaches to tackle the problems it causes. As such, this book deserves to be widely read by lawyers and social scientists alike. * Karen Rowlingson, Professor of Social Policy and Dean of the Faculty of Social Sciences, University of York, UK * Jodi Gardner’s The Future of High-Cost Credit blends philosophical, politico-economic and socio-legal analysis to make a sophisticated and important contribution to the debate on regulation of high-cost credit. * Iain Ramsay, Emeritus Professor of Law, University of Kent, UK * Jodi Gardner’s book, The Future of High-Cost Credit, .... steps across the freedom versus regulation dichotomy that typically characterises debate around high cost credit. Taking a clear eyed view of the issues at hand, the book also addresses the often neglected policy debate relevant to the harms arising from consumer reliance on high cost credit ... The Future of High Cost Credit is valuable, and indeed crucial, reading for those interested in contract theory, credit and banking law, financial regulation and social justice. * Jeannie Paterson, Professor of Law, Melbourne Social Equity Institute, Australia * Gardner provides a deft exploration of high-cost credit, or ‘payday’ loans, in the UK – not shying away from complexity and debate. She lays bare the business models which can keep borrowers trapped in an exploitative and expensive cycle of credit, the insufficiencies of the existing regulatory approaches to tame the market, and why the problem will persist as poverty rates soar in the UK. This book is a devastating indictment of the system around high-cost credit. * Mia Gray, Professor of Geography, University of Cambridge, UK *