For better or worse – the demise of the high-cost short-term credit market and consumer protection

In an article in this publication last year, the author suggested that a cap on the cost of payday loans would have a negative impact on consumers who have come to rely on high-cost short-term credit (HCSTC) to purchase necessities, predominately due to higher-risk borrowers being priced out of the market. In the wake of the cost­ cap, research suggests that affected consumers are now going without essentials, with a small number moving to illicit sources of credit in order to fill the void left by the reduction of available HCSTC. Moreover, the cost-cap has, rather predictably, led to the contraction of the HCSTC market, so much so that payday loans giant Wonga fell into administration on 31 August 2018. This article examines the impact of the collapse of the HCSTC market on the financial wellbeing of consumers.