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RESEARCH PAPER
Regulation of Usury: Justification, Consequences, and Some Lessons from Polish Experience
1
Department of Microeconomics, Cracow University of Economics, Poland
Submission date: 2021-10-09
Final revision date: 2022-01-11
Acceptance date: 2022-04-13
Publication date: 2022-06-30
Corresponding author
GNPJE 2022;310(2):57-73
KEYWORDS
JEL CLASSIFICATION CODES
ABSTRACT
In this paper we analyse a recent debate on justification of usury regulations and
their implications. To investigate the impact of liberal, competition-enhancing
policy on usurious practices, we present a case study of the Polish payday loan
market after 2008. We also examine the efficacy of usury regulations in Poland.
Our study finds that consumer welfare, social welfare, and the risk of exploitation
of borrowers are the main arguments for introducing interest caps. We demonstrate
that, in pursuit of greater profits, loan companies use additional non-interest
fees and commissions as well as bundling, and thereby reduce the transparency
of loan agreements. We show that rising competition on the payday loan market
is not sufficient to reduce the cost of loans, especially when the efficacy of regulatory
control is deficient and unsatisfactory. Therefore, the efficacy of the judicial
system can be seen as essential to combat usurious lending.
FUNDING
This paper was financed with a subsidy granted to the Cracow University of Economics.
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