Birmingham Fair Money has now been live for 4 weeks to highlight the affordable personal lending provision in Birmingham, and support competition to high cost lenders, disrupting their growth.
The first 4 weeks have seen:
- 350 users call in to the cabin for a loan or advice on their current loans
- 733 users of the web site also being routed to either a loan or advice
Majority of loans enquiries tend to be small and routed to Street UK or Moneyline, which is new to Birmingham offering affordable and responsible loans from £50 – £250 and has seen a very strong flow of enquiries, establishing their 20th shop as one of its busiest.
We have seen a few loan applications to refinance high cost loans that have come in to us directly or through the Birmingham Fair Money project, and where possible we are lending to assist escape from high cost loans without the need for a debt strategy.
Where a loan was inappropriate, the clients have been actively referred to a number of support agencies for intervention, and we are grateful to our partners which include Shelter, Cavell Nurses Trust, Unison Welfare (There for You), and Stepchange who are supporting active cases currently.
We had always intended to use this project to better understand the payday lending in Birmingham. Without transparency of this market, issues and impacts have remained anecdotal, and we are now recording the concerns of those who have used these loans and of those who remain trapped in repayment of them.
Common and most surprising, to us is that the key problem faced by those using these loans is the lack of visibility.
· Receipts are not being provided
· statements are not being provided
· there is no pre notification of use of the continuous payment order
· There is very little understanding of the amount outstanding
· Almost no visibility of fees and interest being added
Less surprising is that the level of interest and fees means that the loan repaid bears no resemblance of the loan taken out. £50 loan without any late fees or penalties may cost £217.55 to repay, with fees and penal costs a £300 loan has been advised to cost over £1500.
& the final common thread is that there is little by way of affordability checking, with many borrowing for day to day expenses which should make it obvious to the lender that the borrower can’t afford repayments.
When combined the lack of visibility, limited affordability checks and the high cost mean the impact on those using the loans is significant and among the stories so far includes:
- Moving back in with parents (with her child)
- 2 separate cases where work could not be continued because the bank account was emptied and unable to get to work
- Many cases where the bank account is left unusable due to fees and continuous payment authority being in place.
It becomes clear that we cannot and must not directly compete but we must act to protect those who are falling prey to this sector. Birmingham Council are proposing a manifesto which sets out how it will try to protect local residents from high cost lending.
In the mean time we have just 4 weeks left to influence the FCA in their proposed regulation of this sector.
Please can we ask everyone to sign the e-petition to ask the Martin Wheatley of FCA to support the call for tougher regulation of payday lenders.
The report on the first 4 weeks is available here: BFM interim report for circulation
For further information please hesitate to contact me.
Thanks & kindest regards
Angela Clements, Chief Executive Officer,
Owned and managed by the members for the members,
Authorised and regulated by the Prudential Regulatory Authority and Financial Conduct Authority
16 Waterloo Street, Birmingham.B2 5UG
Tel: 0121 616 6200
Text: 07786 204389