Our recent analysis of the Debt Need Survey provides important new evidence about the drivers of illegal lending. Contrary to recent reports of a 'credit vacuum' arising from regulatory interventions, we find most users of illegal lenders are 'maxed out' on legal credit. The underlying problem is poverty, which credit markets cannot be expected to address.

Following the Chancellor's Mansion House speech there have been calls for the FCA to review its creditworthiness and affordability rules. In this blog, we argue these regulations are not the reason why fewer low income households have been able to access credit in recent years. Those calling for a watering down of consumer protections are ignoring the wider context of the cost-of-living crisis which has made consumer credit less affordable.

April will see further pressure piled on households whose finances have been shattered in recent years. With the economy teetering on the brink of recession too, we need to both reduce prices and boost demand. A VAT cut, as many are calling for, could help.

Employer Salary Advance Schemes (ESAS) and loans provided with the security of 'first call' on wages are expanding. Whilst collecting repayments directly from pay helps reduce the cost of borrowing, there are concerns that the products could harm some customers. In this blog we urge providers to ensure advances and loans are affordable and for mechanisms to be put in place so financially distressed customers can easily request a suspension of payments. We also call for further research to be conducted into the impacts of the products.

In July, we reflected on new evidence looking at people’s experience of using illegal lenders. Today, we are publishing our secondary analysis of the FCA's Financial Lives Survey, 2020 highlighting how demographic factors and financial pressures combine to increase the risk of borrowing from loan sharks. We find that having borrowed from legal high-cost lenders in the past 12 months greatly increases this risk and call for direct measures to counter cost-of-living pressures as the means to counter it.

Reports that Government is considering a 'U-turn' with respect to the regulation of Buy Now Pay Later products indicates a willingness to sacrifice consumer protection for temporary economic growth. It would also make for a huge divergence between Britain and other jurisdictions, including the EU, who are proposing a tougher crack-down on what, essentially, is just another version of the credit card.

Estimates of illegal moneylending use vary widely, from just 200,000 to over 1 million. But whatever the true scale of the problem, the main drivers are likely to be poverty and over-indebtedness rather than a "credit vacuum". Carl Packman reflects on the latest evidence.

With Council Tax debt rising, and the use of bailiffs increasing, Carl Packman reflects on Dr. Joseph Spooner's analysis of how austerity economics over the past decade has led many local authorities to become 'hardened creditors'.