Abstract
AbstractThe regulatory protection of credit consumers, in general, is paramount due to the considerable use of credit, the imbalanced bargaining positions of the contracting parties and the adverse effect of over-indebtedness on individuals and society alike. These concerning factors are worsened in the case of High-Cost Short-Term Credit (HCSTC) consumers owing to their disadvantaged financial position and other recognised vulnerabilities. In this respect, the paper argues that direct regulatory intervention, despite its importance, is not always a silver bullet. Through the analysis of the overhauling of the UK HCSTC regulatory framework, this paper demonstrates the shortfalls of these regulatory changes. Accordingly, the paper shifts the argument towards improving the decision-making mechanisms of HCSTC consumers, ie the role of ‘libertarian paternalism’-based interventions. By using a bespoke experimental survey, the paper demonstrates the type of behavioural interventions that can assist in this endeavour and which the regulator could possibly mandate.
Highlights
The 2008 financial crisis originated in the banking and financial sector, its impacts have been felt, beyond the financial market, in the day-to-day life of ordinary citizens in the UK due to the budget cuts and austerity measures that followed.1 The 2008 financial crash brought noticeable change to the regulatory side of the financial sector, where new regulators were created and sweeping changes were made to the underlying regulatory framework
It is suggested that behavioural economics, ‘libertarian paternalism’, could have a role to play in influencing the behaviour of High-Cost Short-Term Credit (HCSTC) consumers and helping improve their borrowing decisions
There is no doubt that the host of the regulatory changes brought in by the Financial Conduct Authority (FCA) to the HCSTC market has achieved some positive results regarding consumer protection
Summary
The 2008 financial crisis originated in the banking and financial sector, its impacts have been felt, beyond the financial market, in the day-to-day life of ordinary citizens in the UK due to the budget cuts and austerity measures that followed. The 2008 financial crash brought noticeable change to the regulatory side of the financial sector, where new regulators were created and sweeping changes were made to the underlying regulatory framework. The 2008 financial crisis originated in the banking and financial sector, its impacts have been felt, beyond the financial market, in the day-to-day life of ordinary citizens in the UK due to the budget cuts and austerity measures that followed.. The 2008 financial crash brought noticeable change to the regulatory side of the financial sector, where new regulators were created and sweeping changes were made to the underlying regulatory framework. The financial market witnessed a proliferation in HCSTC providers, who enjoyed a period of lax regulation and provided a much-needed service. They supplemented those ordinary citizens with limited access to mainstream lending with credit, yet their practices at times were widely exploitative and came at a hefty price.
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