By Lea Pachta
Responding to the Liberal Democrats’ manifesto pledges to impose maximum interest rates for credit cards and store cards, Fiona Hoyle, FLA Head of Consumer Finance, said:
“Charging interest rates based on risk is a feature of prudential lending. Interest rate caps do not work and could lead more people into debt. In other countries which impose a maximum interest rate, the cap becomes the normal price for credit and rates that are lower than the cap all converge towards it.
“If the limit is set too high, consumers end up paying more, and if the limit is set too low, lenders will be forced to exit the market leaving vulnerable customers prey to loan sharks.”
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