Ebook Access To Credit In The Alternative Consumer Credit Market
This paper concerns access to credit for vulnerable consumers. Its focus is consumer protection but the topic is wider than conventional understandings of consumer protection. It raises issues such as financial exclusion and its relationship to social exclusion, as well as issues of urban development. Some of the issues discussed are not new to the public policy agenda.
The search to provide small loans to lower income consumers at reasonable prices has a long history, and the Croll-Basford report in 1967 outlined a central issue in consumer credit policy to be “the plight of the low income families who are from time to time in desperate need of credit for necessary goods and services but to whom commercial credit is either not readily available or not available at all”. Students of consumer law are familiar also with David Caplovitz’ classic text “The Poor Pay More” written in the early 1960s. There have, however, been changes in the economy and social structure since that time and I examine the implications of these changes for consumers as well as assessing approaches which have been taken to protect vulnerable consumers.
The Paper is divided into five parts. Part I explores the concept of the vulnerable consumer and outlines those socio-economic factors which contribute to the growing segmentation of consumer credit markets, a phenomenon which has led some writers to identify the rise of an alternative financial sector. Part II provides a thumbnail sketch of this sector. Part III outlines rationales and explanations for regulation of consumer credit markets serving vulnerable consumers. Part IV provides an assessment of the existing legal framework of consumer credit protections as they affect vulnerable consumers, Part V evaluates some initiatives for expanding consumer choices and Part VI supplies a brief conclusion. Recommendations for further research and policy making are included in the executive summary.
Contents
Introduction
I: The Vulnerable Consumer
II: The Alternative Financial Sector
- 1. Cheque cashing
2. Payday Loans
3. Pawnbrokers and second hand dealers
4. Rent to own
5. Tax rebate discounting: Lessons for Policymaking?
6. Loan Brokers
7. Finance Companies and consumers
8. Other forms of small loan and sub prime lending
9. Why do individuals use the alternative financial sector?
10. Summary
III: Rationales and Explanations for Regulation
- 1. Traditional neo- classical economic framework
2. Bounded rationality, cognitive distortions and market manipulation
3. Equity and distributive justice
- (1) Fairness
(2) Financial Exclusion
(3) Consumer protection and “positive welfare”
4. Explanations of existing patterns of regulation of low income markets
IV: Assessment of Existing Legal Framework
- 1. General Issues
- (1) Federal/Provincial jurisdiction
(2) The Form of consumer protection legislation in relation to vulnerable consumers
(3) Enforcement issues
2. Common law doctrines and private law remedies
3. Trade Practices Legislation
4. Information policies
5. Controlling Terms
6. Controlling Terms: Interest Rate Ceilings
7. Licensing and other controls on entry
8. Bans
9. Human Rights Legislation
V: Expanding Choices
- 1. Lifeline banking
2. Credit Unions
3. Direct deposit
4. The Role of Community Institutions
5. Short Term loans for necessities
6. Counselling and education
VI: Conclusion
Endnotes
Appendix 1
Appendix 2
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