Thursday, 29 March 2007

Treasury Proposes Financial Inclusion Strategy

The Treasury has today released details of its plans to develop a Financial Inclusion Strategy after the completion of the Comprehensive Spending Review. Financial inclusion: the way forward sets out the Government's goals for financial inclusion policy. Building on the Economic Secretary's announcement before the Budget, that there will be a new Financial Inclusion Fund for the next spending period, which will maintain the 'current level of intensity' of action to promote financial inclusion.

The document also announces a £6 million extension to the Growth Fund to further support for credit unions and community development finance institutions

Ed Balls, commenting on Financial Inclusion, said:

"We have made real progress on financial inclusion but there is still a lot more to do. Tackling financial exclusion is essential for both our economic prosperity and for social justice. It is good for individuals, for society and the economy as a whole. I look forward to working with everyone to drive this agenda forwards in the coming months."

Debt on our Doorstep welcomes the commitment to develop a national financial inclusion strategy but is disappointed that the resources to be made available to support this appear limited to current levels and there is no indication that the Government will compel banks to make increased levels of proviate finance available to third sector lenders.

Damon Gibbons, Chair of Debt on our Doorstep commented:

"The devil will be in the detail of the strategy. But without any regulatory levers on the banks to increase their investment in third sector lenders we remain sceptical that this will achieve the level of growth required to bring affordable financial services and credit to those on the lowest incomes"

Tuesday, 27 March 2007

New Look Dood Newsletter Published

Spring sees the launch of our new look newsletter, which will be used to keep members informed of developments in the campaign for responsible credit. The first issue provides information on our key priorities for the coming financial year, as well as detailing the UK Credit Options conference and providing the first in our series of 'who's who in predatory lending' - focusing on BrightHouse and its links with private equity company Terra Firma Capital Partners.

You can download a copy in pdf format from the Network pages on our main website.

Fair Enough? UK Credit Options in 2007 : Dood and CAS Conference

Fair enough?
- UK Credit Options in 2007
Date: 29th and 30th May 2007
Venue: Scottish Storytelling Centre, Royal Mile, Edinburgh

The second UK conference on Responsible Credit will take place on 29th and 30th May at Edinburgh's Scottish Storytelling Centre on the Royal Mile, with an expected 100 delegates from across the UK and with guests from the European Coalition for Responsible Credit (ECRC). It is being hosted by Citizens Advice Scotland and Debt on our Doorstep and the proceedings from the conference will feed into the ECRC’s forthcoming European conference to be held in Brussels on the 14th and 15th September 2007.

If you have an interest in the agendas of debt and financial inclusion then this conference is for you!

Full details of the conference including an online booking form are available from the Citizens Advice Scotland website .

Problems with Loan Sharks or Doorstep Lenders? ITV Need You!

ITV is making a programme about loan sharks, doorstep lenders, bad credit and their affect on families.

We would like to hear from people who have experience of these problems and would like to speak out about them.

Claire Garner
020 7578 4216

Agencies wishing to help can donload a pdf copy of a flyer to pin on your notice boards from the network pages of our main site, please follow the following link:
ITV Notice board flyer

Saturday, 17 March 2007

Credit Unions Launch Current Accounts

The Association of British Credit Unions Limited (ABCUL) this week unveiled their new current account services, which aim to provide an alternative to high cost bank accounts (particularly by avoiding high cost default charges).

Speaking at the ABCUL AGM in Blackpool on 15th March, Chief Executive Mark Lyonette said:

“We can offer a current account service similar to the banks, but with all the added extras associated with a financial co-operative that is owned and run by its members, for the benefit of members.”

The accounts, which will include a debit card for purchasing goods and making cash withdrawals, will not feature an overdraft option, meaning no high charges or fees. People who require a bank account in order to benefit from Direct Debit and Standing Order payments, will be ideally served by the credit union current account.

South Korea: Limiting Rates and Tackling Exclusion

Dood Comment on South Korean Initiatives:

Recent reports (see below, and previous post) from South Korea demonstrate how measures are being taken to tackle both extortionate lending and financial exclusion. There are lessons to be learnt from this approach in the UK and the proposal to require financial instiutions to make services available to low income consumers echoes calls in the UK for a universal banking obligation and a US style Community Reinvestment Act.

From The Korea Times: 28th February 2007

1 in 5 Adults Denied Bank Loans

By Lee Hyo-sik

One out of every five Korean adults are denied loans and other financial services from banks and other institutional financial firms because of poor credit ratings and unstable job status, an opposition party lawmaker said Wednesday.

Rep. Shim Sang-jeong of the minor opposition Democratic Labor Party (DLP) said many of them have no choice but to borrow from private moneylenders who charge excessively high interest rates.

Citing data submitted by the Financial Supervisory Service (FSS), Shim said about 5.64 million adults aged 18-90 were unable to carry out normal financial activities with institutional financial services companies at the end of last year, accounting for 16.3 percent of the country’s 34.7 million adults, up 10.2 percent from 2005.

``These days, a large number of people, even those in their 20s and early 30s, have no choice but to go to private lenders for funds as banks and other establishments refuse to grant loans or issue credit cards to them because of their poor credit history and insecure job standing,’’ Shim said.

She said in reality, more people are disallowed various financial services than the statistics show, insisting that at least 7.2 million adults, or 20.8 percent of the total, are denied loans and credit cards.

The government estimates that about 5.6 million people borrowed money from private lenders last year, paying about 200 percent interest per year on average, much higher than the legal limit of 66 percent set by the government.

The number of registered loan firms stood at 16,780 as of the end of September, while the number of unregistered moneylenders is estimated to be above 25,000, according to the FSS.

To help people with poor credit records and low incomes enjoy everyday financial services, Shim suggested the government should require institutional financial firms to grant loans to low-income households, and set up a state-funded micro-credit institution to provide small amounts of finance to people with little means.(emphasis added by Dood)

With many people defaulting on their loan interest payments because of excessively high interest rates and becoming credit delinquents, the National Assembly is set to revive a ceiling on the interest rates private lenders can charge borrowers.

Last week, politicians agreed to lower the legal limit on annual interest rates to 40 percent of the principle from the current 66 percent. It is expected to pass the bill at a session planned next month.

The governing Uri Party proposed setting the interest rate limit at 40 percent per year last September, while the DLP insisted on adopting a 25 percent interest rate ceiling.

The agreement came after the Ministry of Finance and Economy, which had initially opposed the reintroduction of the interest rate cap, dropped its earlier position to support the measure.

Deputy Prime Minister and Minister of Finance and Economy Kwon O-kyu said last week that the government will ensure the measure has its intended effect. Kwon had initially opposed such a restriction last July when he was appointed as the country’s top economic policymaker.

``We will strengthen the monitoring of private moneylenders to protect borrowers from high interest rates,’’ Kwon said in an address to Uri Party lawmakers.

He also said the government, with the cooperation of associations of private moneylenders, will crack down on moneylenders who are operating illegally.

South Korea: Minister Changes Position to Cap Rates

From korea Times: 22nd February 2007

By Lee Hyo-sik

Finance-Economy Minister Kwon O-kyu has changed his position and now supports placing a ceiling on the interest rate private moneylenders can charge borrowers, mostly people with low incomes who turn to alternative sources for funds.

During a National Assembly hearing on Wednesday, Kwon, who is also deputy prime minister, said that it is necessary to revive state control on interest rates charged on such loans, overturning his earlier position. He openly opposed such a restriction last July when he was appointed as the country’s top economic policymaker.

Kwon said the government has found that there are many people who cannot cope with the excessively high interest rates charged by private moneylenders, and that these people should be protected by a state-initiated social safety net.

Also, Vice Finance-Economy Minister Chin Dong-soo said yesterday during a weekly press briefing that the government should not let ``loan sharks’’ that charge interest rates over the legal limit take advantage of people with low incomes.

An increasing number of young and old with neither good credit records nor regular jobs have turned to private moneylenders for funds over the past year as they are denied loans from banks and other financial firms.

A ministry official also said yesterday that it has decided to lower the legal limit on annual interest rates private lending agencies can charge on loans to 50 percent of the principle from the current 66 percent.

On the same day, the Ministry of Justice said it will consider restoring state control on interest rates on loans, nine years after it abolished the regulation in 1998 at the request of the International Monetary Fund (IMF). As part of its yearly business plan for 2007, the ministry said it will likely limit the yearly interest rates on loans to 40 percent.

Last September, the governing Uri Party proposed setting the interest rate limit at 40 percent per year, while the progressive Democratic Labor Party insisted on adopting a 25 percent interest rate ceiling.

The government estimates that about 5.6 million people borrowed money from private lenders last year, paying about 200 percent interest per year on average.

There were about 16,000 private moneylenders registered with the government as of June, but some 40,000 illegal moneylenders are estimated to operate in the country.

According to the National Information Credit Evaluation (NICE) firm, one of the local credit rating agencies, outstanding balance of loans extended by loan sharks increased to 796 billion won in 2006 from 570 billion a year earlier.

Oregon needs a rate cap on all consumer loans

From the Statesman Journal, Oregon


March 15, 2007

There's an easy way for Oregon to help low-income families in our state be more stable and productive, and to protect middle-income families who get caught by debt problems when, for example, medical bills mount unexpectedly: Oregon could protect these families from irresponsible lenders.

Oregon currently allows most consumer lenders to charge whatever interest rates they can squeeze out of their customers, no matter how desperate those customers may be.

Some Oregonians think that the state Legislature solved this problem last year when it enacted an annual interest-rate cap of 36 percent on payday loans, to take effect this coming July.

Unfortunately, payday lenders have already found a way around the rate cap, even before it goes into effect. Because the rate cap will apply only to "short-term" consumer lenders, payday outfits are avoiding the cap simply by altering their loan product a bit and obtaining a new "conventional" consumer lender's license from the state.

The cap on payday loan interest doesn't protect consumers from other greedy lenders. Car-title lenders, for example, will remain free to charge unlimited rates of interest and fees. Check-cashing outfits also face no limits on their fees; these outfits are not even required to obtain a license from the state.

Gov. Ted Kulongoski has proposed a series of bills to improve the situation. One bill (House Bill 2205) makes it more difficult for short-term payday lenders to avoid the rate cap taking effect in July by morphing into "conventional" lenders. Another bill (HB 2204) extends the 36 percent interest-rate cap on short-term payday loans to short-term car title lenders. A third bill (HB 2202) requires check-cashing outfits to limit the fees they charge to cash government and payroll checks.

Each of the governor's bills won the support of at least two-thirds of the Oregon House of Representatives. They now await action in the Senate.

Low- and middle-income Oregonians can applaud these bills. They would take Oregon a couple of significant steps forward in protecting desperate families from irresponsible lenders.

To fully protect consumers from greedy lenders, though, additional steps are necessary. Most importantly, Oregon needs a reasonable blanket interest-rate cap on all consumer loans. The only way to keep lenders from finding loopholes that allow them to skirt an interest-rate cap is to extend the cap to all consumer loans.

There are now more payday lenders in Oregon than McDonald's and 7-Elevens combined. These outfits are canaries in Oregon's mine shaft, warning us of the dangerous levels of desperation among our families. We can relieve the pressure by cutting down on the profit being made off economically strapped families. It's the responsible thing to do.

Michael Leachman of Portland is a policy analyst for Oregon Center for Public Policy in Silverton. He can be reached at

Families stuck in payday lending trouble

From The Roanoke Times, Saturday 17th March

Helen O'Beirne

O'Beirne is responsible lending coordinator for the Virginia Partnership to Encourage Responsible Lending.

The bad news: Predatory payday lending is still alive in Virginia, at least until our next General Assembly session. Every year this problem goes unaddressed, payday lenders strip $160 million in excessive fees from the paychecks of hardworking Virginians.

The good news: People are getting it. Gov. Timothy Kaine gets it. He publicly declared his intention to impose a limit on the amount of interest payday lenders could charge.

Members of the House of Delegates get it. They passed an interest rate cap of 72 percent for payday loans -- still twice the normal usury limit for Virginia's small loan companies, but a much more reasonable rate than the 400 percent payday lenders typically charge.

And the general public gets it. Concerned citizens from across the commonwealth continue to voice their discontent over the exploits of payday lending. Faith groups call it usury, moral outrage. The business community is ashamed to be associated with payday lenders. Labor leaders decry the maltreatment of their members.

This issue is not going away. Including Virginia, legislators in at least 13 states have introduced legislation this year that would place similar interest rate caps on payday and car title loans to all their citizens. Virginia's General Assembly was the first legislature to consider such a measure in 2007, and could have been the first to enact the law, providing true leadership in a movement that continues to grow across the country. But the payday industry hijacked the process, using a slick public relations campaign and lobbying blitz to push its own idea of "reform."

There was a reason they were so willing to accept these so-called reform measures -- each had been tried in other states, and each had failed to stop the abuses. In other words, the payday lending industry's version of reform was a package of half measures that, at the end of the day, would allow them to conduct business as usual -- debt trap and all.

When it became clear that the industry was never interested in real reform that addressed the abusive aspects of payday lending, Kaine called their bluff and announced his objective to amend the bill when it reached him by adding an annual interest rate cap of 36 percent. If it's good enough for military families, its good enough for all Virginians, the governor told the press.

The industry killed the bill rather than agree to this cap.

Payday lenders depend on repeat borrowing and exorbitant interest rates for their survival. But these elements are what makes payday lending so financially devastating. Giving an industry built on loan flipping an exemption from the state's interest rate cap was a bad idea in the beginning, and it's still a bad idea today.

Virginia's firefighters, police officers, teachers, nurses and service workers all deserve to keep their hard-earned cash for real needs, rather than handing it over week after week to predatory lenders who have them caught in a trap.

This issue is sure to be on the agenda next year. The industry will again try to head off real reform by offering weak provisions that don't threaten their ability to operate loan-flipping businesses. And a strong and growing coalition of advocates from every point on the political spectrum will return with new energy.

It can't come soon enough. Every day that payday lending isn't brought under control, another hard-working Virginian is paying exorbitant interest and cycling deeper into inescapable debt traps that spell financial ruin for their families.

Thursday, 15 March 2007

Provident Customers and Profits Up As Banks Tighten Lending Criteria

Provident's half year pre-tax profits were reported up 5.5% to £193.1 million earlier this month, supported by the first growth in customers in the UK Home Credit Market for three years (up 2% to 152 million).

Provident's Chief Executive Peter Crook commented:

"We've obviously seen significant rises in impairment at most of the banks and credit card issuers. As a result, they've tightened up their credit criteria significantly. My sense is that this is pushing more people down into the home-collected part of the market, and that is the main source of where those sorts of consumers will access small sums of credit."

The Home Credit Market was found to be uncompetitive and offering poor value to customers by the Competition Commission in late 2006 at an estimated cost of at least £75 million per year. Remedies designed to address this are expected to be implemented by the end of 2007 and may take several months beyond that to have an impact on prices. In the interim, these figures show that Provident continues to profit at their customers' expense.

Ed Balls Announces Extension of Financial Inclusion Fund

Ed Balls, the Economic Secretary to the Treasury, yesterday announced that the Financial Inclusion Fund would be extended to 2011 to provide for "financial inclusion activity at the current level of intensity". Following 2011, he expects to see financial inclusion activities mainstreamed into core departmental activities. The Financial Inclusion Fund will continue to be monitored by the Financial Inclusion Taskforce until 2011.

Speaking at a Resolution Foundation event called to discuss the Treasury's proposal for the creation of a generic financial advice service, Balls stressed that there was a continued commitment to financial inclusion across Government and following the Comprehensive Spending Review, a new cross-Government Ministerial working group on Financial Inclusion would be established to develop a detailed financial inclusion action plan for implementation.

Responding to the announcement Damon Gibbons, Chair of Debt on our Doorstep, commented:

"The commitment to create a national financial inclusion action plan is to be welcomed. However, much more effort needs to be made to obtain financial services industry contributions to support an expansion of money advice and affordable credit provision. Continuing the Financial Inclusion Fund at its current level - although better than nothing - is inadequate to bring about the level of change required."

Debt on our Doorstep has called on DTI Minister Ian McCartney to consider a levy on the Door to Door lending industry of £100 million - the amount of excess profits that they will make between now and the implementation of the Competition Commission's recommendations - to boost credit union and third sector lending to the poorest at affordable rates.

"At a stroke that would quadruple the Government's contribution to the growth of affordable credit through the Financial Inclusion Fund", said Mr Gibbons.

Tuesday, 13 March 2007

Petition Against Bailiff Violence

Peter Bardsley, the Chairman of a Credit Union and a development worker in one of the poorest areas in Manchester has posted a petition against Bailiff Violence on the Downing Street website. The Petition is reproduced below. Debt on our Doorstep is urging all supporters to sign it.

This morning there are 1557 signatures.

The committee stage of the Tribunals Courts and Enforcement Bill starts in the House of Commons on the 15th March. The members are.

Vera Baird, Mr Henry Bellingham, Mr Richard Benyon, James Brokenshire, Mr David Drew, Mr Tobias Ellwood, Mr Robert Flello, Mr Michael Foster (Worcester), Simon Hughes, Mr David Kidney, Sarah McCarthy-Fry, Judy Mallaber, Dr Doug Naysmith, Mr Brooks Newmark, Anne Snelgrove, Emily Thornberry and Jenny Willott.

An amendment to the Bill which will restore the right to refuse entry to bailiffs has been proposed by Dood Member Zacchaeus 2000. This has been sent to every member of the committee; it will be tabled.


We the undersigned petition the Prime Minister to restore the ancient rights of British citizens to refuse the forced entry of bailiffs.

On the 06 July 2004 Standing Committee E considering the Domestic Violence, Crime and Victims Bill, the Parliamentary Under-Secretary of State for Constitutional Affairs did not tell the Committee that they were abolishing the rights of citizens to refuse entry to bailiffs established in around 1300, confirmed in Semayne’s case in 1604, and upheld by the courts ever since. The Committee was not informed that it was abolishing centuries of common law. Neither was the measure introduced or debated on the floor of the House of Commons. We demand this fundamental right to freedom from the threat of violence in our own homes be reinstated, and safeguarded for the protection of future generations.

Wednesday, 7 March 2007

Poor Pay More

The Family Welfare Association and Save the Children have issued a new report into the extent to which those on the lowest incomes pay the most for essential services, including financial services.

The report reveals that poor families could pay up to a £1000 per year extra for the most essential goods and services such as gas, electricity and insurance. As the Government struggles to get back on track to meet its child poverty target, the gains being made in terms of increased family incomes are being lost by this poverty premium.

In relation to financial services, the report states:

" While significant progress has been made on financial inclusion,there are several challenges, which are still to be met.Awareness of basic bank accounts remains too low; their use in many cases is limited; and they do not yet meet the needs of low-income customers, particularly around bill payment and flexible direct debit options.The banking industry and government must move faster on pursuing this agenda.While it is preferable that banks take a lead, driven by social responsibility or commercial strategy, the government must be willing to use incentives or regulation where appropriate, to ensure this basic need for suitable banking is met. One specific improvement to basic banking would be the introduction of a £10 overdraft buffer zone."

The report is available at and supporters are urged to e-mail Gordon Brown from the same website.