The seeming desire on the part of our politicians to regulate practices known as “predatory lending” simply does not stack up. I say this for a number of reasons:
- Other than a few anecdotes1 there is no real evidence that this is commonly happening in Australia.
- It is covered in any case by the UCCC (Uniform Consumer Credit Code) unless people sign a document stating the loan is for business purposes.
- A new regulatory regime is not going to be cheap.
- There is no evidence it is going to help in any case.
- There is in fact good evidence that “usurious” lending actually helps the borrower.
Regular readers here would know that, while I work in one of the more regulated industries, I generally oppose more regulation and believe that regulation should be minimised and only added to where there is evidence it will help. Basel II is an example of this – while much larger than the regulations it is replacing, the movement towards a truly economic base for regulation is a good thing.
Going back to Middle Ages style usury laws is not. If there might be a serious problem, let’s check it out first. Come up with some evidence it is a problem. work out whether the regulation is going to cost more than the problem does etc. etc. etc. You know, the basic stuff that should be done before you add an additional burden on us all.
1. And remember, the plural of “anecdote” is