Greg Stevens, Chief Executive of the CCTA, said: “We welcome the Treasury Select Committee’s recognition that credit plays an ‘essential’ role in many people’s lives, and has been critical in helping households weather the financial crisis and the aftermath.

“Nonetheless, we are concerned with the Committee’s calls for the FCA to consider wider caps on credit, which will be both counterproductive and harm consumers. This conclusion appears to be based on evidence that the high-cost short-term price cap was almost exclusively beneficial to consumers, and that there was no trade-off between regulating these products and denying access to credit for those who need it.

“But there is clear evidence that this is not the case. FCA statistics show there was a doubling in borrowing from home credit and rent-to-own businesses in the two years following the introduction of the payday cap. The cap forced consumers into other products that were available to them, rather than surviving without this essential line of financial support.

“The Treasury estimates there are 300,000 people using illegal lenders and others put the number much higher. The FCA says 3.1 million are borrowing from ‘friends and family’, for many a euphemism for illegal lenders. The lesson is clear: cap legal sources and borrowers find second choices — these might be regulated, equally they might not.

“A cautious approach is needed, and while they may look great on paper, they are counterproductive in practice — and will cause more consumer harm.”