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Commenting on the announcement that the Financial Conduct Authority is to impose caps on payday loans, Mark Littlewood, Director General at the Institute of Economic Affairs said:

"Having the regulator set maximum interest rates and penalties for late payment will freeze out the most needy from the credit market.

"Payday loan companies will no longer be willing to lend to those judged to be at a fairly high risk of defaulting. Previously, these people could arrange a short term loan from legitimate businesses. As has been the experience in other countries, we can now expect more of them to turn to often viscous loan sharks that operate entirely outside the law. "

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Notes to editors:

The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems.
 

The IEA is a registered educational charity and independent of all political parties.