Russell Hamblin-Boone, Chief Executive of the Consumer Finance Association, which represents the major short-term lenders operating in the UK, said:
“We are surprised by the Government’s announcement as we already have voluntary caps on the number of times a loan can be extended and on fees and interest for people in financial difficulty.
“If the objective of the proposed cap is to drive out rogue lenders the Australian experience has had some success, however it has not reduced household debt or the need for credit. Instead there has been an increase in the number of people who turn to the growing illegal lending market, which the Australian regulator has admitted is a problem.
“We look forward to the detailed discussions as to how a cap on the cost of credit will actually benefit consumers in the UK and impact on the availability of flexible credit.”