This section contains the Centre's recent press releases.
The Real Cost of Christmas: assessing the impact of illegal money lending on consumers
15 January 2010
Today, Circle Anglia published a report produced by The Financial Inclusion Centre estimating the impact of illegal loan shark lending on vulnerable consumers at Christmas.
The key findings include: up to 100,000 households may have turned to loan sharks at Christmas 2009; the value of illegal loans taken out at Christmas 2009 was an estimated £29m but victims would end up repaying a total of £82m; the average cost for these illegal Christmas loans was equivalent to 825% APR; a consumer borrowing a typical amount of £288 from an illegal lender would end up paying back nearly three times this amount (£820); it will take more than a year for the typical family to repay their Christmas debts; but borrowing from a third sector community based lender such as a credit union instead of a loan shark would save a typical low income household £500 (based on the original loan of £288).
Reforming financial markets consultation - response by The Financial Inclusion Centre
The Financial Inclusion Centre submitted its response to HM Treasury's important consultation on reforming financial markets. The Centre argues that the priorities for government intervention and financial market reforms should be to reform financial markets so that they are:
fair and inclusive;
efficient and competitive;
sustainable and produce socially useful products and services;
well governed and accountable to consumers and wider society;
stable and secure; and
properly and robustly regulated.
While complacency must be avoided due to the risk of a secondary banking crisis, interventions by policymakers do seem to have been successful in rescuing and stabilising the banking and financial system and the worst of the immediate crisis may have passed. However, we must not forget how the financial crisis has affected the most vulnerable consumers in the form of higher unemployment, repossessions and arrears, and exposure to financial scams and arrears. The Centre calls on the Government to launch a new Financial Crisis Action Plan to protect the most vulnerable consumers from the crisis and ensure consumer financial needs are met in future.
Consumers on low incomes with no savings are being hit hardest as high street lending dries up – and many will be forced to borrow from unregulated, sub-prime money lenders unless Government makes new, affordable forms of credit available, says a report by the Financial Inclusion Centre published today by Consumer Focus.
Over three million UK consumers have no access to mainstream credit and this number looks set to rise dramatically as tough new borrowing criteria affects those on low incomes with no savings most, according to From Feast to Famine – a study looking at how consumer credit is being rationed during the financial crisis.
Gross lending is down 60 per cent on this time last year leaving many desperate consumers with little choice but to turn to the informal, sub-prime lending sector – often known for extreme rates of interest (sometimes over 1000 per cent APR), unfair terms and conditions, and at worst, illegal scams and aggressive sales tactics.
The authors note that while past lending excesses need reigning in, access to credit in the short-term can be vital for vulnerable consumers – such as those who have been made redundant and need short-term loans until benefit or payment protection insurance (PPI) payments take affect.
The report was commissioned by Consumer Focus to stimulate debate and calls on Government to consider a range of options in developing its G20 assistance package to make new, more affordable forms of credit available.
Mick McAteer, Financial Inclusion Centre, said: “Access to fair and affordable credit provides a lifeline for consumers facing difficult financial circumstances. But as access to mainstream credit dries up many vulnerable consumers will be forced into the hands of unscrupulous lenders charging extortionate interest rates.
“We need to urgently develop innovative ways of funding and providing access to affordable credit for vulnerable communities.”
Philip Cullum, Deputy Chief Executive, Consumer Focus said: “Those facing tough times need viable options to avoid losing their home or suffering serious financial problems.
“Help was quick to arrive for those lucky enough to have savings, but consumers at greatest risk need help now. Government must take steps to stimulate lending at rates people can afford.”
Options to be considered include Government underwriting loans to vulnerable consumers, or using its stake in high street banks to force them to lend to vulnerable consumers. Alternatively, the Government could promote and fund new lending channels in the not-for-profit sector – such as the Post Office network, credit unions and the social fund.
The report was researched and written by Mick McAteer and Delroy Corinalidi, Financial Inclusion Centre. Reforming the financial system
A new report launched today (Tuesday 31st March 2009) by The Financial Inclusion Centre has set out the need for radical reform of the financial services industry and put forward proposals for that reform.
The report entitled: ‘Reforming the Financial System’ was commissioned by Unite the union in order to explore how the finance world needs to be reformed so that it meets the needs of society and prevent another similar crisis from occurring.
Derek Simpson, Unite Joint General Secretary said: “Staff working in the financial services industry know better then most the urgent need for major regulatory reform in the financial services sector. The report published today must be considered by the government and financial regulator in order to ensure that this important sector of our economy is able to emerge from the current crisis and is strong enough to compete in a global environment.
“Unite will continue to campaign to achieve a regulatory framework that is strong and able to meet the needs of all consumers, this includes the most vulnerable in society. Unless there is a total overhaul of the finance industry the public interest will continue to be ignored. We can not allow the senior bankers to go back to business as usual.”
Mick McAteer, Director, The Financial Inclusion Centre said: “We are in a new era of uncertainty caused by weak regulation and the reckless behaviour of financial institutions that has put at risk the savings, investments, pensions and jobs of millions of UK citizens. But out of adversity comes opportunity. The report sets out a series of radical, but pragmatic and necessary measures to reform the financial system so it meets the need of society.
“Radical reform is needed given the scale of the financial crisis, tinkering with the system is not an option.”
The report considers: international regulatory reform, regulatory accountability, a new approach to regulation, governance of financial institutions and the role of long term investors; and bank restructuring.
- Ends-
For more information contact: Saba Mozakka, Unite press office on: 020 7420 8916 or 07768 693 953 or Mick McAteer, Financial Inclusion Centre, 020 7636 1136 or 0783 779 7748
Notes to Editors
- Please note the scheduled launch has now been postponed due to a change in the parliamentary schedule. This will no-longer take place on Tuesday 31st March 2009 in The House of Commons.
- Key quotes from the ‘Reforming the Financial System’ report:
“The relationship between regulators and regulated has become dysfunctional. Financial markets have fallen victim to the herd-instinct compounded by a sense of arrogance in the infallibility of markets and financial market operators. But the regulators who were meant to be regulating these markets have also fallen victim to ‘group-think’ believing that the role of regulators was to create the conditions for markets to operate, and then take a step back to allow the informed ‘self-interest’ of markets to police itself.”
“Moreover, responsible, sustainable behaviour is likely to emerge if a more collective system of rewards is encouraged. The concentration of large bonuses in the hands of a number of key employees (the rain makers) distorts behaviour and puts the financial futures and livelihoods of employees in the hands of a powerful few with precious little accountability.”
“Indeed, the banks must be held to account for their role as primary agents in almost wrecking the financial system (under proper conditions banks can be the agents of sustainable wealth creation – this is not an attack on banking or the City of London per se). Our proposals are designed to better align the interests of the banking system with the interests of society, consumers and industry. But we must recognise that banks were agents of destruction. The capacity for destruction vested in the banks was given to them by society. We delegated the power to the banks and failed to hold them to account so they exercised power responsibly.”
Reforming_financial_system_full_report.pdf Northern Ireland consumers pay more for insurance A new report 'Quote ...Unquote' commissioned from The Financial Inclusion Centre by The Consumer Council of Northern Ireland was launched today in Belfast (Monday 30th March 2009). The report shows how households in Northern Ireland are paying around £160 million a year more for insurance compared to similar households in GB. The report also found serious levels of financial exclusion in the insurance market in Northern Ireland.
The press release accompanying the report can be found at http://www.consumercouncil.org.uk/newsroom
Are banks and building societies playing fair? The Centre's report on the price consumers are paying for banks and building societies not passing on cuts in benchmark interest rates Are_banks_and_building_societies_playing fair?
FSA findings on mortgage arrears The Centre's response to the FSA's findings on how lenders are treating mortgage customers in arrears
