|UK lending 'extortionate' - Barnardo's 'Breadline Britain' report is further evidence that some providers continue preying on some of Britain's poorest families with +500% APR loans.
|Press release from DOOD blog website
BARNARDO'S SLAMS PROVIDENT RATES OF 545%
Wednesday, 29 July 2009 at 14:04
Barnardo's 'Breadline Britain' report, published yesterday, rightly slams Provident's 545% APR loans to some of Britain's poorest families as 'extortionate'. The report comes on the same day that Provident announced a rise in pre-tax profits in the first six months of the year and following admissions from Provident Chief Executive Peter Crook that one of the effects of the credit crisis has been to drive people previously catered for by cheaper lenders to the high cost end of the market.
But what is to be done about the problem? The OFT has today published it's Financial Strategy Action Plan which contains, amongst other things, an acknowledgement that competition in our credit markets has been curtailed by the crisis and is failing to deliver a fair deal for consumers.
That comes as no surprise. In 2006/07 the Competition Commission investigation into door to door lenders found that nearly £100 million in excess profits were being made by firms in this market. But with competition weakening, the Commission's own remedies, which largely relied on people being able to build up a credit record and move onto cheaper, more mainstream types of borrowing, have failed to address the problem. The movement is all the other way.
We now need urgent and direct action to address this failure. As part of its plan, the OFT is reviewing the high cost credit market and rightly considering the case for a cap on credit charges. In our view, this cannot come too soon and we will be submitting evidence on this issue to the OFT in late August. But the real need now is for supporting agencies to lobby their M.P's to support the introduction of legislation to cap credit costs before the next general election. If you are able to help with the campaign, please get in touch by e-mailing email@example.com
Press release from Bernardo’s website
LENDERS CASHING IN ON CHILD POVERTY
Release Date: 20/07/2009
MONEY LENDERS ARE CASHING IN WHILST THE RECESSION THROWS CHILDREN INTO DEEPER POVERTY.
Research by Barnardo’s has found that families living in poverty have to turn to expensive and unaffordable loan companies to survive.
It is launched on the same day as the Child Poverty Bill is debated in the House of Commons for the first time.
The children’s charity followed the lives of 16 families all living below the government poverty line as the country fell into recession.
Gary, 47, who lives with his wife and two children, revealed:
I would rather not borrow at all, but just have to, to stay alive.
Many poor families live in areas of high unemployment and when the cash coming in doesn’t meet their needs they don’t have access to low interest loans because they’re seen by high street banks as too risky.
The Government’s social fund, where no interest is charged, can sometimes be a saviour, but lack of funding means people can be turned away even if they qualify - 32 per cent of applications were refused in 2007/08.
It means that poor parents are left with no choice but to turn to firms like the Provident Financial which charges interest rates of up to 367 per cent APR.
Father-of-five Ralph, whose wife died four years ago, was forced to borrow from the Provident despite being horrified by the level of interest. He said:
It was scary and it kept me awake at night.
At 14 Jelani, the eldest of four siblings, knows what his mother is going through. When asked how he would describe his mum’s life he said:
Quite difficult… she can’t cope. We’re always asking for too much… she’s asking for loans and debts.
She’s putting her own life at risk.
Barnardo’s chief executive Martin Narey said:
The poorest families are bearing the brunt of the recession.
They are in hopeless situations. Typically, they have no savings, nothing to fall back on, no relatives or friends to help and in desperation they take out loans with huge interest charges, the repayment of which plunges them into deeper poverty. Such families, without any spare cash to meet unforeseen difficulties, need urgent access to affordable credit.
But families in poverty, those Labour promised to rescue in 1999 with its courageous commitment to halve child poverty, need also to know they have not been forgotten. There is still time, even now, for the Government to decide to honour its historic pledge. Failure to do so will simply send more families into unmanageable debt.
The Child Poverty Bill, which aims to eradicate child poverty by 2020, and which is being debated in the Commons today, will be little short of a mockery of family poverty if it is not accompanied by a determination to ease the catastrophe of family poverty and debt next year, not in 11 years time.
NOTES TO EDITORS
• The executive summary of Barnardo’s research, called Below the breadline: a year in the life of families in poverty, is available under embargo.
• For case studies please call media officer Rebecca Goding on 020 8498 7534 or the media office on 020 8498 7555.
• Names in the report have been changed at the request of the people who took part.
• Provident Financial will release its interim results on Wednesday, July 28.
• The Provident netted 558,000 new customers last year – up from 525,000 in 2007. Its total number of home credit customers was 1,762,000 in 2008, compared to 1,650,000 in 2007.
• In 2008/09, the largest increases in unemployment were seen in low-earning occupations such as process, plant and machine operatives and skilled trades, all of which have seen increases of 4 per cent or more. In comparison, unemployment among professionals and managers has increased by around 1 per cent.
• The Child Poverty Bill will put the Government’s commitment to eradicate child poverty by 2020 in statute, ensuring that it remains a continuing priority for future governments. Barnardo’s welcomes the bill, but has concerns, particularly that this legislation will divert from the Government’s pledge to halve child poverty by 2010. Barnardo’s second reading briefing is available on request.
Created: 04/08/09. Last changed: 04/08/09.
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