The inboxes at New Start are currently going through the computer equivalent of cold turkey. Late July always delivers a storm before the lull – or parliamentary recess as it’s better known. There’s a bombardment of press releases, reports and announcements and then… nothing.
For the next few weeks we’ll be living off a diet of releases about kids’ face-painting competitions and fun runs, along with adverts for Viagra and messages from a nice young lady in Ukraine who very much wants to be our new friend.
There’s always a sneaking suspicion that somewhere in July’s deluge is a report that government would rather you didn’t read and a nagging doubt that you’ve missed important findings worthy of exposure.
But there were two reports that stuck out – both from Barnardo’s.
The charity followed 16 families living in poverty over the course of a year following the onset of recession. It concluded that they were falling deeper into deprivation as a result of their reliance on money lenders, the biggest of which currently charges in excess of 500% interest. Last week Barnardo’s called for an investigation into the practices of doorstep lenders. It came just days after London Citizens organised a rally calling for restrictions on the interest rates charged by loan sharks and credit card companies.
But haven’t we been here before? We recently revisited this subject (New Start, June 2009). Back in 2004 the National Consumer Council lodged a super-complaint against the home credit industry which, after investigation, was upheld by the Office of Fair Trading (OFT) and then subsequently looked into by the Competition Commission. Everyone agreed there was a problem, but little action was taken. In the meantime we’ve had another five years of overpriced loans, locking more people into a cycle of poverty. As Barnardo’s highlights in Counting on credit, typical interest rates for a £300 home credit loan are 254.5%.
The OFT is apparently looking into the matter once again – but is there any point? The laughable defence given by lenders when accused of exploiting the poor is that satisfaction levels among customers are high. Hardly surprising when your target market has few (if any) alternatives. As long as they monopolise the market it’s hard to see how restrictions on lenders will make a substantial difference.
The solution? Greater support for credit unions would be a good start. And taking up Urban Forum’s suggestion of a Community Reinvestment Act would offer a comprehensive solution to financial exclusion. Why bother trying to coerce lenders when you could introduce legislation that ensures deprived communities are better served by banks in the first place?
Added on Thursday, 6th August 2009 | This entry has 0 comments
The inboxes at New Start are currently going through the computer equivalent of cold turkey. Late July always delivers a storm before the lull – or parliamentary recess as it’s better known.