Backing the fight to Stop the Payday Loan Rip-Off

By on 15/10/2013 in Cllr Cotton, News

Citysave Credit Union and Birmingham City Council are backing the Charter to Stop the Payday Loan Rip-Off, which has been launched today by cross-party group of MPs and some of Britain's biggest debt, consumer and anti-poverty organisations.

The Charter has the following requests:

  • Stop them giving loans to people who can't realistically afford to pay them back
  • Stop them repeatedly rolling over loans and creating spiralling debt
  • Stop hidden or excessive charges
  • Stop them raiding borrowers' bank accounts without their knowledge and leaving them in hardship
  • Stop irresponsible advertising and instead provide clear and transparent information
  • Require lenders to promote free and independent debt advice, and ensure they co-operate with other services to help people get out of debt.
  • Action to support the growth of credit unions and other forms of more responsible lending.
  • Banks to increase the availability of credit to people on low and middle incomes.
  • New research on capping the total cost of credit undertaken now.

Citysave CEO Angela Clements said: “For four years we have presented evidence to regulators asking for changes to the way the high cost lenders operate in the city, and yet the situation has only deteriorated. High profits have brought in more predatory lenders, with shops now all across our city, and even more operating on line and doorstep lending. The regulators have allowed them free reign, with self regulation and a code of conduct that has not been enforced despite clear evidence that this sector has become 'toxic' (Which? 2013)

“We are seeing more people damaged by this lending, with a growth in debt problems that are affecting the whole household. This has many impacts, with this affecting their ability to work, and on their health, with worry about arrears in key household bills and even the ability to buy basic groceries. Most noticeable in recent years is the number of middle income earners who have got caught out, as access to affordable credit has become more difficult, and we hear repeatedly that it was originally a small loan that appeared to be affordable that led to a debt problem that is now a huge drain on their monthly income.

“The change in regulator from April 2014 is an opportunity to get the regulation better, so that it protects consumers. We see the requests in this Charter as being fundamental, and would address almost all of the issues that concern us.”

Citysave Credit Union and Birmingham Council have joined forces to create Birmingham Fair Money, an umbrella for all of the not for profit lenders in Birmingham to be promoted under to better compete with high cost lenders operating in Birmingham, which is part of the FairBrum campaign. www.birminghamfairmoney.org.uk

This has included a cabin sited prominently in the centre of Birmingham within 100 yards of 14 high cost lending shops.

Cllr John Cotton

Cllr John Cotton

Cllr John Cotton, Cabinet Member for Social Cohesion and Equalities, advises: “We are firmly behind the wider need for access to affordable credit and better banking services in our city. In the short term that requires asking for better regulation of high cost lenders which will be properly enforced. In itself that will be a huge win, but beyond we have more work to do in our city.”

Angela added “We are determined to provide wider access to affordable credit in Birmingham, particularly in areas where there is a need to challenge the growth of high cost lending. As a credit union our own Charter is based upon the promotion of thrift and financial wellbeing. As well as ethical and affordable loans, which are priced below the main high street banks for all comparable products, we now offer banking services, and we ask all our members to save with us, as we see this as a way to reduce reliance on high cost credit.

“Community based Credit Unions like Citysave are run by members for the benefit of members. Every £1 we lend it is estimated we add £10 to the local economy, and I strongly believe that we have a duty to extend our work in Birmingham providing a community based range of financial services that is truly open to all of those who live or work in our City.

“In the past year we have invested in new infrastructure to be able to expand, bringing new products and services, including a Fair Terms Payday Loan, and we now work with over 200 partner organisations across our city reaching more people than ever. However, the prolific growth in high cost lending sector seen in Birmingham is fuelled by the profits being reaped, and we cannot hold back the tide. We have an opportunity to make sure this time that the regulation is effective in curbing the elements that cause most harm, and we fully support this Charter and call for change.”

At the launch of the Charter, Peter Tutton, Head of Policy, StepChange Debt Charity, who have been working actively with Citysave said: “Payday loans are pushing more and more people into acute repayment difficulties. Over 30,000 people contacted us for help with payday loans in the first half of 2013, almost the same as for the whole of 2012. This is a dangerous market for financially vulnerable consumers and effective regulation is long overdue. New rules from the FCA are a step forward but key controls are missing. The Charter sends a clear message: We need stronger limits on runaway debt and real-time enforcement to truly get on top of harmful lending.”

Back the Charter to Stop the Payday Loan Rip-off – sign the petition now

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