- structural and conduct features which limit the extent to which customer demand is responsive to the price of payday loans, and
- structural features which weaken the competitive constraint that might otherwise be imposed on payday lenders’ prices by the prospect of new entry or expansion by smaller lenders
Customer detriment may therefore arise because customers pay more for their loans than if price competition were more effective and there may be less innovation on pricing overall in the market. Uncle Buck comments that, since the implementation of the price cap this is likely to dis-incentivise lenders to be more innovative on pricing due to the initial cost cap and overall total cost of credit cap restricting the viability of using pricing as a competitive mechanism, however lenders do seem to be seeking alternative product offerings within the limitations of the price cap.
The viability of operating under price cap restrictions is yet to be tested, and more lenders may leave the market over the coming months if they are unable to adopt a sustainable business model.