Debt on our Doorstep: Tackling Loan Sharks and more ….

Me Niall Cooper National Coordinator, Church Action on Poverty Coordinator of Debt on our Doorstep campaign

Debt crisis? CAB dealt with 47% more consumer credit debt problems over the last five years 7.9 million people systematically refused access to mainstream credit in Sub-prime market estimated to be worth £16 billion a year to non-standard lenders Doorstep lending is a booming industry worth around £3.3bn. Customers of doorstep lenders borrowed an average of £739 a year in 1999.

What’s the story? “I have a fifteen year old daughter and she needs clothes so I have to get a Provi loan or vouchers. It’s hard. At the end of my benefit I’ve nothing left to pay back the loan and vouchers. I can’t spend money on shopping and bills.” CAP national policy forum participant – 9 July 2001

Mary’s story Mary, a lone mother on Income Support took out a £200 Provvy 30 week loan – at 330% apr. One month later, encouraged to take out another £500 loan, £310 more interest - 170% apr. Mary ran into difficulties, offered a £1,000 loan, further £620 interest over 54 weeks, at 170% apr. In six months, Mary’s loan of £200 had turned into a debt of £2,227. Profiting from Poverty

What’s the story 2? “I don’t think anyone can understand properly just how it feels, to dread letters coming through the letter box. When they did come you’d feel so ill you’d put the letters behind the mantelpiece – never even open them sometimes.” CAP national policy forum participant – 9 th July 2001

Daylight robbery LenderLoan Repay Period APR London £485£90075 weeks159% Scottish Provident £400£63653 weeks164% Morses £150£23231 weeks365% CLC£50£7515 weeks1,564% New Economics Foundation, Profiting from Poverty, 2002

Extortionate retail credit ProductArgosBrighthouse Sanyo 28” TV£399 £562 cash price £809 without service £1246 with service New World £330£422 cash price Gas cooker£607 without service £934 with service Microwave£99+£17£104 cash £134 with service £207 with service Cathrine Haines, Bullwell Credit Union, 2003

Provident Financial: Profiting from poverty FTSE 100 company Customers: 1.5 million Loans: Average £800 (& getting bigger) Average apr: 180% Profit per £1 loaned: around 50p Profits: £160 million Expanding into Eastern Europe Co-op: 5% shareholding

Impacts Debt spiral Stress and poor health Child poverty Work disincentive Undermines neighbourhoods

Desperation… “At the moment I’m on income support and child benefit. I’ve used the Provvy and Shopacheck and I’ve been unable to keep paying them so I don’t do that no more. Now I have to buy from shoplifters so I have money to look after myself.” CAP national policy forum participant – 9 July 2001

Market failure? 71% of home credit market held by 4 companies Inability for borrowers to "switch" to cheaper lenders Interest rates out of line with actual levels of risk involved “Provident Financial don’t have any competition. If there was competition people would offer lower charges, but is seems there is none. People have little option.” c AP national policy forum participant – 9 July 2001

Policy Failure? Vulnerable customers + Lack of competition + Lack of regulation + No ceiling on charges + Lack affordable alternatives + Failure of Social Fund + Lack of money advice and budgeting = Extortionate lending

Joined up Government? “Without action across government, tighter regulation alone could make matters worse. To be effective, tougher legislation needs to be combined with support for initiatives that widen access to affordable credit and money advice. Profiting from Poverty

Holistic Policy Solutions Stronger regulation, including cap on interest and charges Develop affordable alternatives Money advice and budgeting Community development finance institutions

Ireland Strong Credit Union movement: 30%+ of population Money advice and budgeting service: Nationally funded, 60 centres

Clonmel Credit Union 16,000 members (50% population) Loans at.875% per month (c10%apr) Savings: protection & annual dividend Life savings, loan protection, death benefit insurance House, contents and car insurance Mortgages Bureau de Change, rail tickets and hotel discounts

Debt on our Doorstep Membership network Lobbying for coordinated Government strategy for ‘fair finance’ Working with media and MPs Lobbying civil servants and Ministers

What you can do Evidence of ‘market failure’ Encourage MPs to get involved Send a postcard to Patricia Hewitt Join Debt on our Doorstep

Time for a change… “People are still trapped in debt and poverty. When will change come?” CAP national policy forum participant – 9 th July