Payday lending and the Consumer Credit Act

Kerry Broomfield and Dr. Nicholas Ryder , Department of Law , Faculty of Business and Law , University of the West of England , Bristol .

Introduction

Access to credit under the former Labour government influenced a ‘credit boom’ that falsely fuelled a period of economic prosperity that spectacularly failed and contributed towards the most recent global financial crisis. As a result, we have seen an unprecedented contraction in the availability of main stream and convenient credit for consumers and businesses. Therefore, in order to obtain credit, an increasing number of debtors have begun to use payday lenders. In July 2012, the charity ‘Shelter’ reported that one-million people had used the loan facilities offered by payday lenders since July 2011, and that the total number of people who had used payday lenders numbered 7m.[1] As a result of the increased use of payday lending and some of the lending practices involved in the sector, the Office of Fair Trading (OFT) has undertaken a review of payday lending practices. The aim of this brief note is to identify the credit licence provisions of the Consumer Credit Act 1974 (CCA) that payday lenders have to comply with to comment on the recent measures introduced by the OFT.