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Local communities can help crack payday lenders’ hold on the vulnerable

Simon Read

PaydaySplash 179x300 Local communities can help crack payday lenders hold on the vulnerableLast week the Office of Fair Trading gave rogue payday lenders just 12 weeks to get their act together and play fair with customers, or be closed down. Meanwhile the government has promised to clamp down on the misleading advertising used by high-cost credit providers.

But we know from experience that it can take years for regulators and legislators to change things for good. In the meantime the battle to keep vulnerable people out of the clutches of unscrupulous payday lenders is being fought by local communities.

Last month in the North East, for instance, local groups – including Citizens Advice – held a Fair Credit “listening event” in the centre of Newcastle. Leading the day was financial inclusion charity Fincan, chaired by Alison Baxter. “We wanted to hear the views of people who may have been affected by high cost credit,” she says.

“Not many of us involved in the day have been in the position where the only way we could pay our mortgage that month was take out a loan which would cost almost half again to pay back. The event allowed us to gather some interesting stories from those who usd pay day lending firms.”

The campaign for Fair Credit in the north-east also has support from the local council. Newcastle Deputy Council Leader Joyce McCarty said: “We know that times are tough for many local people who are struggling to pay bills and risk getting into debt. That’s why we are working closely with Newcastle CAB and others to help people at risk.”

In Kilburn in north London, local community leaders have taken on the challenge to tackle the menace of expensive payday lenders. Last Thursday they met council chiefs to try to improve access to fair credit in the area and give vulnerable people an affordable alternative to payday lenders.

The Kilburn Fair Credit Commission aims to improve the presence of credit unions in the area. The community- or work-based financial institutions offer low-cost loans to their members and can help ensure people don’t fall into the loan trap set by unscrupulous payday lenders.

Sarah Hayward, leader of Camden Council, and Muhammed Butt, leader of Brent Council, have agreed to work with the Commission to examine the idea of setting up a Community Finance Hub on Kilburn High Road.

It would help guide local residents towards credit unions as well as offering financial advice and money management courses. The Council has promised a progress report by 9 April, which I will look forward to seeing.

But it’s through partnerships with caring communities and councils that we can help people avoid falling into desperate straits by borrowing money at rates they can’t afford.

Another new weapon against payday lenders is London Mutual Credit Union’s CUOK! service. It’s similar to a payday loan in that it offers fast turnaround with a loan decision in 15 minutes, but it’s much cheaper than commercial short-term credit companies. A £400 loan from the scheme, for instance, will cost £8, compared to £120 or more at a typical payday lender.

The scheme is only available currently in Southwark, Lambeth or Westminster, but I hope other credit unions will follow London Mutual’s lead and offer it.

I also hope that the positive examples of Newcastle, Brent and Camden will be followed by other councils across the country. We must do all we can to help keep vulnerable people out of the clutches of unscrupulous lenders.

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  • http://twitter.com/thecdfa cdfa

    As well as clamping down on payday lenders the government must support community initiatives like these.
    There’s also a national network of community finance providers – like Scotcash in Glasgow – which are social enterprises making fair and affordable loans to people that may otherwise go to payday lenders. They also provide money advice and help with budgeting, and make sure people in their local community aren’t plunged into cycles of debt. But they don’t have the advertising budgets of the likes of Wonga, you won’t see their google ads on pages like this, and they don’t have the resources to tell the world about the great work they’re doing. But there are details at findingfinance.org.uk

  • stonecold90

    Again the free-market turns up trumps for the poorest in society. No wonder the right-wing love it so.

  • http://www.debtconsolidationcare.com/User/sally.nachelle Sally Nachelle

    Well researched article. It’s quite true that nowadays it’s very easy to get quick cash assistance through payday loan. People can get payday loan very easily without any hassles because lenders don’t check the credit report of the consumers. Lenders give these short-term loans at high interest rates to the consumers. As a result it becomes difficult for borrowers to pay back the full amounts. You can get payday loan through internet also. But there is high chance that the loan will be illegal. People usually take out payday loans during financial emergencies. But lending of payday loan is not legal in most of the state of US. That’s why you should aware about the payday loan laws before taking out a payday loan.
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