Skip to main content
×
×
Home

Payday lending in the UK: the regul(aris)ation of a necessary evil?

  • KAREN ROWLINGSON (a1), LINDSEY APPLEYARD (a2) and JODI GARDNER (a3)
Abstract

Concern about the increasing use of payday lending led the UK's Financial Conduct Authority to introduce landmark reforms in 2014/15. While these reforms have generally been welcomed as a way of curbing ‘extortionate’ and ‘predatory’ lending, this paper presents a more nuanced picture based on a theoretically-informed analysis of the growth and nature of payday lending combined with original and rigorous qualitative interviews with customers. We argue that payday lending has grown as a result of three major and inter-related trends: growing income insecurity for people both in and out of work; cuts in state welfare provision; and increasing financialisation. Recent reforms of payday lending do nothing to tackle these root causes. Our research also makes a major contribution to debates about the ‘everyday life’ of financialisation by focusing on the ‘lived experience’ of borrowers. We show that, contrary to the rather simplistic picture presented by the media and many campaigners, various aspects of payday lending are actually welcomed by customers, given the situations they are in. Tighter regulation may therefore have negative consequences for some. More generally, we argue that the regul(aris)ation of payday lending reinforces the shift in the role of the state from provider/redistributor to regulator/enabler.

  • View HTML
    • Send article to Kindle

      To send this article to your Kindle, first ensure no-reply@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about sending to your Kindle. Find out more about sending to your Kindle.

      Note you can select to send to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be sent to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

      Find out more about the Kindle Personal Document Service.

      Payday lending in the UK: the regul(aris)ation of a necessary evil?
      Available formats
      ×
      Send article to Dropbox

      To send this article to your Dropbox account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your <service> account. Find out more about sending content to Dropbox.

      Payday lending in the UK: the regul(aris)ation of a necessary evil?
      Available formats
      ×
      Send article to Google Drive

      To send this article to your Google Drive account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your <service> account. Find out more about sending content to Google Drive.

      Payday lending in the UK: the regul(aris)ation of a necessary evil?
      Available formats
      ×
Copyright
This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted re-use, distribution, and reproduction in any medium, provided the original work is properly cited.
References
Hide All
Aitken, R. (2010), Regul(ariz)ation of fringe credit: payday lending and the borders of global financial practice, Competition and Change, Vol 14, 2, June, 80–99.
Appleyard, L., Gardner, J. and Rowlingson, K. (2015), Introducing a time delay on access to credit: is it just delaying the inevitable? University of Birmingham: Centre on Household Assets and Savings Management.
Arrighi, H. (1994), The long twentieth century: money, power and the origins of our times, New York: Verso.
Banks, M., Marston, G., Karger, H. and Russell, R. (2012), Caught short: exploring the role of small, short-term loans in the lives of Australians, Brisbane: The University of Queensland.
Beatty, C. and Fothergill, S. (2013), Hitting the poorest areas hardest, Sheffield: Sheffield Hallam University.
Beddows, S. and McAteer, M. (2014), Payday lending: fixing a broken market, London: Association of Chartered Certified Accountants.
Clasen, J. and Koslowski, A. (2013), ‘Unemployment and income protection: how do better-earning households expect to manage financially?’ Journal of Social Policy, May 2013, 1–17.
Committee on Ways and Means (2008), Temporary Assistance for Needy Families Extension, quoted in Marston and Shevellar (2014).
Competition and Markets Authority (2014a), Payday lending market investigation: provisional findings report, London: Competition and Markets Authority.
Competition and Markets Authority (2014b), Research into the payday lending market: Final report, London: Competition and Markets Authority.
Coppock, S. (2013), ‘The everyday geographies of financialisation: impacts; subjects and alternativesCambridge Journal of Regions, Economy and Society, 6, 479500.
Corlett, A. and Whittaker, M. (2014), Low Pay Britain 2014, London: Resolution Foundation.
Crouch, C. (2009), ‘Privatised Keynesianism: An Unacknowledged Policy Regime’ The British Journal of Politics & International Relations, Volume 11, Issue 3, pages 382–399, August 2009.
Crouch, C. (2011), The strange non-death of neo-liberalism, Cambridge: Polity Press.
Davis, G. (2009), Managed by the markets: how finance re-shaped America, Oxford: Oxford University Press.
Deville, J. (2015), Lived Economies of Default, Routledge.
Dumenil, G. and Levy, D. (2004), Capital resurgent: roots of neoliberal revolution, Cambridge MA: Harvard University Press.
Fairbanks, R. (2009), How it works: recovering citizens in post-welfare Philadelphia, Chicago: Chicago University Press.
FCA (2014a), Policy Statement: Detailed rules for the Financial Conduct Authority regime for consumer credit including feedback on Financial Conduct Authority Quarterly Consultation Paper 13/18 and ‘made rules’.
FCA (2014b), ‘FCA confirms price cap rule for payday lenders’, Financial Conduct Authority Press Release 11 November.
Finlayson, A. (2009), ‘Financialisation, financial literacy and asset-based welfare’ British Journal of Politics and International Relations, vol 11, 400–421.
Gallmeyer, A. and Roberts, W. (2009), ‘Payday lenders and economically distressed communities: a spatial analysis of financial predationThe Social Science Journal, 46, 3, 521538.
Gardner, J. (2013), ‘Payday Lending in the United Kingdom: Meeting the Needs of the Modern Borrower (M.Phil Thesis, University of Oxford).
Gentleman, A. (2013), ‘Wonga: the real cost of a payday loan’ The Guardian <http://www.theguardian.com/business/2012/mar/01/wonga-real-cost-payday-loan> accessed 12 February 2013.
Gibbons, D. (2012), Taking on the money lenders: Lessons from Japan, London: Centre for Responsible Credit.
Gibbons, D. (2015), Where now for local welfare schemes? London: Centre for Responsible Credit.
Gottschalk, M. (2000), The Shadow Welfare State: Labor, business and the politics of health care in the US, Ithaca: NY: Cornell University Press.
Harvey, D. (2005), A brief history of neo-liberalism, Oxford: Oxford University Press.
Heyes, J., Lewis, P. and Clark, I. (2012), ‘Varieties of capitalism, neoliberalism and the economic crisis of 2008-?’, Industrial Relations Journal, 43:3, 222241.
Hirsch, D. (2015), A minimum income standard for the UK in 2015, York: Joseph Rowntree Foundation.
Hood, A. and Phillips, D. (2015), Benefit Spending and Reforms: The Coalition Government's Record, London: Institute for Fiscal Studies Briefing Note BN160.
Horsley, M. (2015), The Dark Side of Prosperity, Farnham: Ashgate.
IFS (2013), Better-off hit hardest by recession initially; poor feeling the squeeze now, London: Institute for Fiscal Studies, http://www.ifs.org.uk/pr/inequality_recession_june2013.pdf.
IPPR (2014:19), Jumping the shark: building institutions to spread access to affordable credit, London: Institute for Public Policy Research.
Karger, H. (2005), Shortchanged: Life and debt in the fringe economy, San Francisco, CA, Berrett-Koehler Publishers.
Klein, R. and Millar, J. (1995), ‘Do-it-yourself social policySocial Policy & Administration, 9, 4, 303316.
Kotz, D. (2010), ‘Financialisation and neoliberalism’ in Teeple, G. and McBride, S. (eds), Relation of global power, Toronto: University of Toronto Press, 118.
Krippner, G. (2005), ‘The financialisation of the American EconomySocio-economic Review, 3, 173208.
Langley, P. (2008), The everyday life of global finance: saving and borrowing in Anglo-America, Oxford: Oxford University Press.
Lupton, R., with Burchardt, T., Fitzgerald, A., Hills, J., McKnight, A., Obolenskaya, P., Stewart, K., Thomson, S., Tunstall, R. and Vizard, P. (2015), The Coalition's Social Policy Record: Policy, Spending and Outcomes 2010–2015, London: London School of Economics.
MacInnes, T., Aldridge, H., Bushe, S., Tinson, A. and Born, T. (2014), Monitoring poverty and social exclusion 2014, York: Joseph Rowntree Foundation.
McKay, S. and Rowlingson, K. (1999), Social Security in Britain, Basingstoke: Macmillan.
McKay, S. and Rowlingson, K. (2008), ‘Social Security and Welfare Reform’ in Powell, M. (ed) Modernising the Welfare State: the Blair Legacy, Bristol: The Policy Press.
McKay, S. and Rowlingson, K. (forthcoming), ‘Social security under the Coalition and Conservatives’ in Bochel, H. and Powell, M. (eds), Transforming the welfare state? The Coalition government and its aftermath, The Coalition government and social policy: restructuring the welfare state, Bristol: The Policy Press.
Marston, G. and Shevellar, L. (2014), ‘in the shadow of the welfare state: the role of payday lending in poverty survival in Australia’ Journal of Social Policy, 43, 1, 155–172.
Morel, N., Palier, B. and Palme, J. (eds), (2011), Towards a social investment welfare state? Ideas, policies and challenges, Bristol: The Policy Press.
OFT (2013), Payday Lending Compliance Review: Final Report, London: Office of Fair Trading.
Packman, C. (2014), Payday lending: global growth of the high-cost credit market, Basingstoke: Palgrave Macmillan.
Peck, J. (2010), Constructions of neoliberal reason, Oxford: Oxford University Press.
Personal Finances Research Centre/Policis (2006), Illegal lending in the UK, London: Department of Trade and Industry.
Resolution Foundation (2013a), Gaining from growth: the final report of the commission on living standards, London: Resolution Foundation.
Resolution Foundation (2013b), Squeezed Britain 2013, London: Resolution Foundation.
Ritchie, J., Lewis, J., Nicholls, C. and Ormston, R. (eds), (2013), Qualitative Research Practice, 2nd edition, London: Sage.
Rivlin, G. (2011), Broke USA; from pawnshops to poverty line - how the working poor became big business, New York: Harper Collins.
Rowlingson, K. (2002), ‘Private pension policy: the rhetoric of responsibility; the reality of insecurityJournal of Social Policy, vol 31, No.4, October, 623642.
Rowlingson, K., Appleyard, L. and Gardner, J. (2014), Response to the Financial Conduct Authority Consultation, Birmingham: University of Birmingham.
Rowlingson, K. and McKay, S. (2014), Financial Inclusion Annual Monitoring Report 2014, Birmingham: University of Birmingham.
Stoesz, D. (2012), Payday Loans and the Secondary Financial Market, Social Science Research Network, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2029146.
Tebbutt, M. (1983), Making Ends Meet: Pawnbroking and Working-class Credit, Leicester: Leicester University Press.
TNS/BMRB (2014), Research into the payday lending market, London: Taylor Nelson Sofres/British Market Research Bureau.
Thompson, S. (1999), Paying respondents and informants, University of Surrey Social Research Update 14.
Van der Zwan, N. (2014), ‘Making sense of financializationSocio-economic review, 12, 99129.
Walker, R. (2014), The Shame of Poverty, Oxford: Oxford University Press.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Journal of Social Policy
  • ISSN: 0047-2794
  • EISSN: 1469-7823
  • URL: /core/journals/journal-of-social-policy
Please enter your name
Please enter a valid email address
Who would you like to send this to? *
×

Metrics

Altmetric attention score

Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed