Apparently we need a system of providing small sums in short term loans:

The Financial Conduct Authority is looking at ways of encouraging firms to lend to the most vulnerable borrowers after the implosion of the high-cost credit industry that the regulator helped to bring about.

Indeed, the regulator did bring it about, driven on by the shrieking about the high APRs on such loans. That APR isn’t a good way of measuring the cost of a small sum and short term loan didn’t hinder the shrieking of course.

As one of the Federal Reserve banks has pointed out, people do in fact want such loans even at those prices:

Except for the ten to twelve million people who use them every year, just about everybody hates payday loans. Their detractors include many law professors, consumer advocates, members of the clergy, journalists, policymakers, and even the President! But is all the enmity justified? We show that many elements of the payday lending critique—their “unconscionable” and “spiraling” fees and their “targeting” of minorities—don’t hold up under scrutiny and the weight of evidence.

Such payday loans - small sum and short term - are expensive when measured by APR because they’re expensive to provide. There was an attempt by Goodwill to provide them on a non-profit basis and their “interest rate” when so measured had to be 252% just to cover those costs.

As is also pointed out if you set the price of such loans below their cost of provision - as with anything else - then the loans disappear. At which point the regulator is scratching its collective head and wondering how to provide these expensive - because short term and small sum - loans that are desired.

At which point our advice for those who would change the world - build before you ban.

If a new and better credit system is desired then work out what it is and go and build it before you ban the old one. As your new system is going to be better - that is the point of the ban anyway, isn’t it? - then people will flock to it and the old one will die.

This also true of many other things. Build that better power generation system which is indeed cheaper and the fossil fuel one will die. If worker owned cooperatives work better than capitalism then they’ll outcompete, won’t they? As, in that particular case, they often do and sometimes don’t which is how we find out which is the best structure for which activity and part of the economy.

In fact, if you build first then there’s no need to ban, is there?