Dood News

End Legal Loan Sharking Campaign Launched

2010-08-02T06:44:00.002Z

Debt on our Doorstep is pleased to announce the start of the 'end legal loan sharking campaign' which has widespread support from MPs, campaigners and civil society groups. Further details of the campaign can be found at http://www.endlegalloansharks.org.uk/

Better Banking Campaign calls for party leaders to sign up to a programme of real financial reform

2010-04-28T17:48:00.003Z

To the leaders of all parties,

We are writing on behalf of low-income communities, third sector organisations, and small businesses across the UK These groups have suffered and continue to suffer unfairly, because financial institutions have not met their needs. We feel strongly that in return for the privilege of a banking licence, and billions of pounds of public investment, we need a new settlement between society and the financial sector.

Around 6 million people cannot access mainstream credit –often due to having no credit history, not a bad one- and have no choice but to borrow at interest rates of up to 9,000%, leading to inescapable spirals of debt. Lack of access to banking services costs low income households av. £1,000 more a year.

So many of us take credit for granted, with our mortgages and student loans. But low-income communities, third sector organisations and small businesses suffer from unfair access to financial services. Responsible lending, (not lending for lending’s sake) advances us socially and financially.

Therefore, what we want is a financial sector that reaches out to support those who need the most help, and enables them to become financially independent: to build savings and pensions, to have every opportunity to flourish financially and economically. We need a system that actively encourages financial institutions to engage with low income communities, third sector organisations and small businesses.

We call upon the BBC and participants to cover these issues in the final Party Leaders’ Debate:

Requiring banks to publicly disclose where they are lending and providing services – how much and to whom – including in respect of small businesses
With this data, providing incentives and obligations for banks to serve social responsibilities, along the lines of the US Community Reinvestment Act.
Capping the amount that can be legally charged for credit
Reinvesting 1% of banks’ profits for public benefit

Many are still struggling in the wake of the recession. Don’t return us to business as usual.

Signed,

The Better Banking Campaign,
Bishop Doyé Agama, Deputy Moderator, Churches Together in England, National Director, Apostolic Pastoral Association

Black training and enterprise group

Clifford Rosenthal, President/CEO, National Federation of Community Development Credit Unions

Craig Dearden-Phillips MBE – Social EntrepreneurDon Smallwood MBE, Chairman of Preston Road Neighbourhood Development

Dr Doreen Finneron MBE

Dr Rebecca Tunstall, LSE

Dr. Campbell Jones, Past Chair, 2008-2010, of the European Business Ethics Network (UK)

Ed Mayo, Co-operatives UK

Executive Director of the Faith Based Regeneration Network UK

Geoff Mulgan, Director Young Foundation

Hilary Willmer, founder of CROP

Jaz Greer – Founding Director Cast Trust

Jeremy crook OBE

Liz Richardson, University of Manchester, Research fellow

Maria Saur Senior Consultant/Social Anthropologist

Marilyn Taylor, Emeritus Professor, University of the West of England

Marion Jenner, Campaigner

Mark Ebert, Close Brothers PLC PERSONAL CAPACITY

Martin Sime Chief Executive SCVO

Nigel Kershaw OBE, CEO Big Issue Invest

Pat Conaty, Research Fellow, New Economics Foundation

Prof. Peter Case, UWE

Prof. Simon Lilley, Head of the School of Management, University of Leicester

Professor Stefano Harney, Chair, 2010-2012, of the European Business Ethics Network (UK)

Revd. Paul Nicholson, CEO, Z2K

Roger Morton, Campaigner

Sunny Hundal, editor Liberal Conspiracy

The Right Revd Dr John Saxbee, Bishop of Lincoln

African Women’s Empowerment Forum

Council for Ethnic Minority Communities

NorthamptonshireHuman Relations Network

Leicestershire Ethnic Minority Partnership

CREATE Consortium2

Inter-Faith Forums in the South West

2D (Support for the Voluntary and Community Sector of Teesdale and Wear Valley)

3Gs Development Trust

ACEVO

Act on Carbon

Action for Prisoners’ Families

Acumen Trust

Adur Voluntary Action

African Human Right Heritage

Age Concern Brighton and Hove

Amazon Public Relations

Andrew Logan Museum of Sculpture

Anti Poverty Network Cymru (APNC)

Apostolic Pastoral Association

ART(ASTON REINVESTMENT TRUST)

Asset Transfer Unit

Avenues Group

Bad Pony Media Group

Barrow Cadbury

Barrowmore

Bassac

Batley Resource Centre

BCT Regenesis

Beatbullying

Berkshire County Blind Society

Big Issue

InvestB-inspiredBlack Futures Group

Black Health Agency

Black Neighbourhood Renewal and Regeneration Network (BNRRN)

Blagdons Boatyard – Plymouth

Blantyre Credit Union

Brent Private Tenants’ Rights Group

British Society for Rheumatology

Brixton Advice Centre

Brunswick Organic Nursery and Craft Workshop

Bullbrook Community Association

Burngreave New Deal for CommunitiesB

urnley Pendle & Rossendale

CVSC3 Creative Consultancy

CalibreCARE Rent Scheme

Carnegie UK Trust

Castlemilk Credit Union

Catalyst Stockton CCBSCCLACDFA

Centre for Economic and Social Inclusion

Centre for Innovation in Voluntary Action

Centre for Local Economic Strategies

Centre for Responsible Credit

Chapter 1

Chapter Street

Charitable Futures

Charities Advisory Trust

Charities Evaluation Services (CES)

Chartered Institute of Library and Information Professionals

Children England

Children North East

Children Today

Children’s Education Safety Foundation

Chorley and South Ribble CVS

Christian Council for Monetary Justice

Christian Council for Monetary Justice

Church Action on Poverty

Churches and Regional Commission Yorkshire and the Humber

CLES

Clinks

CLYCH

Communities and Organisations: Growth and Support (COGS)

Communities Inc

Community & Voluntary Partners

Community Foundation Network

Community Hub

Community Matters

Community North West

Community Sector Coalition

Community Transport

Community Transport (National Office)

Community Voluntary Partners, Bolsover

Counsel and Care

Creating Excellence

Creative Support

Crisis

CV Sector Forum

Cymryd Rhan

Cyrenians Derby

Diocese Derby Millennium Network

Derbyshire Learning & Development Consortium

Development Trusts Association

Development Trusts Association Scotland

Dimensions

Directory of Social Change

Distinctive Floristry

Dorothy House Hospice

Durham Rural Community Council

EAPN (European Anti-Poverty Network) England

Ecumenical Council for Corporate Responsibility (ECCR)

Elzabeth Finn Care

Emmaeus

Engage CVS

English Federation of Disability Sport

Equal Access Consultancy

Equanomics

Escape Artists

Euclid Network

European Strategy Group

Fair Finance

Fair Pensions

Faith Based Regeneration Network UK

Faith in Action

Financial Inclusion Centre

Flourish International

Forsters PR

Forum 21

Foundation

Four Acre Trust

Fredericks Foundation

FunderFinder

Gateshead Voluntary Organisations Council

Gensing and Central St Leonards Forum

Give A Brick

Gloucestershire Association for Voluntary and Community Action

Goblin Combe Environment Centre

Goole Development Trust

Goole Retail Chamber

Great Places

Groundwork

Grove House

Hackney Council for Voluntary Service, HCVS

Halifax Opportunities Trust

Hands On

Hands on Help for Communities

Harbour Place Day Centre

Hastings and St. Leonards Chess Club

Hastings Trust

HCT Group

Health for All

Heeley City Farm

Home-Start Hounslow

Housing Justice

Hull CVS

ImpACT

InterHealthInvesting for Good

Involve

IPPR North

IT4CH

JET

JHC

KCA

Kensington and Chelsea Social Council

Kent Enterprise Trust

Key House

Knowsley Domestic Violence Support Services

Knowsley Housing Trust

Lankelly Chase Trust

Learning Through Action Trust

Little Red Bus

Local People Lending

London Citizens

London Funders

London play

London Rebuilding Society

London Voluntary Service Council

Manchester Credit Union Limited

Marketplace Chaplains Europe

MCCHMental Health Providers Forum

MERCi – Ideas into action for a sustainable future

Merton Voluntary Service Council

Metropolitan Society for the Blind

Middlesbrough Community Network

Middlesbrough Partnership Financial inclusion Sub-Group

Middlesbrough Voluntary Development Agency

Mind

More Green

MyBnk

NACUW

National Coalition for Independent Action

National Council for Voluntary Youth Services

National Energy Action

National Housing Federation

Nautilus Welfare Fund

NAVCA

NAVO

Need Not Greed

New Directions Foundation

New Era Enterprises

New Horizons (Teesside)

New Prospects

New Start

Newent in Bloom

Newham Voluntary Sector Consortium

North Moor Trust

North West Network

North West Tenants & Residents Assembly

North Yorkshire Learning Consortium

Nottingham Community and Voluntary Service

Nottinhgam Community Network

Novas Scarman Group

NUS

One North West

One Voice Network

Open Sight

Our Future Planet

Over The Wall

Penwith Community Development Trust

Perennial

Pixeco Ltd.

Preston Community Network

Preston Community Network

Preston Road Community Association

Prime Initiative

Prophet Scotland

Quaker Social Action

Red Ochre

Refugee and Migrant Forum of East London

Regenerate Trust

RENAISI

Rhyl Youth Action Group

Rich Regeneration

RNIB

Rochdale Boroughwide Housing

Royal Society for Public Health

Rural Action Derbyshire

Save the Family

School for Social Entrepreneurs

School-Home Support

Seafarers UK

Sedburgh Book Town

See Ability

Senscot

Shared Future Community interest Company

Shelter Housing Aid and Research Project

Shoreditch trust

Snap Enterprise

Social Enterprise Coalition

Social Enterprise Europe Ltd

Social Enterprise London

Social Enterprise Support Centre

Social Enterprise Works

Social Enterprises Working Together

Social Firms UK

Solace Womens Aid

Somerset Youth Volunteering Network

South Coast Moneyline

South Craven Community Action

South Yorkshire Housing Association

Southey and Owlerton Area Regeneration

Spurgeons

St Anne’s Community Services

St Helens Community Empowerment Network

St Helens District CVS

St John Ambulance in South and West Yorkshire

St Vincent de Paul Society

.staa-allotments

Stone King Sewell Solicitors

STRIDE

Surrey Association for Visual Impairment

Surrey Care Trust

Sussex Central YMCA

Sustainable Brampton

Tenant Participatory Advisory Service Cymru

The Camden Society

The Chaseley Trust

the connectives

The Diocese of Worcester

The Ecumenical Council for Corporate Responsibility (ECCR)

The Foyer Federation

The LankellyChase Foundation

The Lantern Project

The Oastler Centre for Faith in Economic Life

The Young Foundation

Theatro Technis

Third Sector European Network

Third Sector European Network

Thurrock CVS (Council for Voluntary Service)

Time to Let

Titus Alexander, Novas Scarman Group

Tower Hamlets Co-operative Development Agency

Town and Country Housing

Trust Thamesmead

Turn2Us

Tyne North Training

Uday Thakkar

Unite the Union

United Response

Unlimited Potential

Urban Forum

V2C

Voluntary Action Barnsley

Voluntary Action Elmbridge

Voluntary Action North East Lincolnshire

Voluntary Action Rotherham

Voluntary Action Sheffield

Voluntary Action Wakefield District

Voluntary Action Westminster

Volunteer Association Lewisham

Voscur

Walterton and Elgin Community Homes

Walworth Garden Farm

Warwickshire Association of Youth Clubs

WCAVA

Wearmouth Community Development Trust

Wessex Community Action

Wester Hailes Fiscal Factor (Financial Inclusion and Social Capital)

Wirral CVS

Wirral Holistic Care Services

Wirral Information Resource for Equality and Disability

Wolseley Trust

Women’s Resource Centre

Woodthorpe Development Trust

Workers’ Educational Association

YMCA Watford

Yorkshire & Humber Regional Forum

Yorkshire Wiildlife Trust

YOU

Your Nutshell

Z2K

Zero-credit

Zest

Rip off TV - the advert

2010-04-21T16:17:00.002Z

Want to pay over the odds for your washing machine and other household goods? Want to pay back through pay as you view TV? No money, no TV. Not good.

Well people in Stockton on Tees are now sending out a warning to the world about rip off TV - catch their fantastic video here:

http://www.youtube.com/watch?v=Juu8RhperKk

Rate cap power for OFT debated in Commons Committee

2010-01-14T19:32:00.005Z

Rob Marris M.P (Lab, Wolverhampton South West), a member of the House of Commons Committee considering the Financial Services Bill, has put down a proposed amendment to the Bill which would provide the Office of Fair Trading with the power to cap credit charges.

The amendments, which Debt on our Doorstep has helped to draft, provide for the OFT to review credit markets within six months of the Financial Services Bill becoming law to establish the level of price competition and if this is found lacking to impose a cap on the total cost for credit. Lenders who disregarded the cap could be fined or lose their consumer credit licenses.

The amendments are being debated in Committee on 14th January although time for consideration is limited and the issue looks likely to be returned to at the Bill's Report Stage debate in the Commons in the next week. A memorandum of evidence to support the amendments has also been submitted by the Centre for Responsible Credit which is available on
the Bill Committee website

Early Day Motion on Home Credit Market

2009-12-21T08:21:00.003Z

Debt on our Doorstep is calling on all supporters to lobby their MP's to support an Early Day Motion (EDM number 379) put down by Ian McCartney M.P on the Home Credit Market.

The EDM, which has already attracted over 50 signatures, reads:

That this House notes the ongoing lack of price competition in the home credit market and the devastating impact that high cost credit is having on the poorest communities as reported by Channel 4's Dispatches programme on 7 December 2009; further notes that the Competition Commission's remedies for this market have not had any impact since its inquiry into the home credit market in 2006; further notes that Provident Financial now charges £82 for every £100 lent, which is 26 per cent. higher than was reported three years ago; further notes that Provident now have an estimated 70 per cent. of the market and that the `unfair credit relationship' test introduced by the Consumer Credit Act 2006 has not led to a single instance of prices being lowered; believes that urgent and effective action is now required to help low income borrowers obtain credit at a fair price; and calls on the Government to provide the Office of Fair Trading with a power to cap prices in non-competitive areas of the credit market, or the Competition Commission to immediately review its remedies for the home credit market and or the Financial Services Authority to introduce a rule requiring banks to demonstrate how they are helping to expand access to affordable credit, for example by partnering with credit unions.

Supporters are urged to write to their M.P's asking them to sign up to the EDM. The list of current signatories can be found at http://edmi.parliament.uk/EDMi/EDMDetails.aspx?EDMID=39940&SESSION=903

Speech to All Party Parliamentary Group on Credit Unions

2009-12-02T15:41:00.002Z

A copy of Debt on our Doorstep Chair, Damon Gibbons, speech to the All Party Parliamentary Group on Credit Unions is now available here

New report highlights 'flawed' evidence base of Government policy on rate caps

2009-11-25T17:30:00.002Z

A new report from the New Economic Foundation has revealed that Government's previous decision in 2006 not to implement a rate cap was based on 'flawed' evidence. The report, Doorstep Robbery, reveals that a prior DTI funded study of interest rate caps in other countries ('the Policis Report') failed to meet even basic standards of social research. It also indicates that poor people in the UK are more likely to be financially excluded than in France and Germany as well as paying a much higher price for credit.

The NEF report calls on Government to introduce a cap on the total charge for credit and for banks to be obliged to meet the needs of low income households for affordable credit either directly through the provision of overdraft credit or in partnership with credit unions.

The full report can be downloaded from http://www.neweconomics.org/fairlending and is being launched tonight at the London Citizens Meeting in the Barbican Centre, which will see 2,000 people call for a cap on interest rates at 20% of the total charge for credit - see http://www.londoncitizens.org.uk/pages/newsarchive/2009-11-17-%20November%20Assembly.html

BBC Inside Out reports on the misery caused by Home Credit

2009-11-22T16:31:00.004Z

Low income borrowers using Home Credit are being charged amongst the highest costs to be found in the whole of Europe and the US. That's the shocking finding reported tonight on BBC's Inside Out programme to be broadcast in the West Midlands. The report, which was undertaken in Coventry also found that a huge amount of the local Citizen Advice Bureau's work was taken up in dealing with problems caused by just one company - Provident Financial.

Our own review of prices charged by Provident has found that these have increased by 26% in just three years. This is despite the Competition Commission introducing measures in 2007/08 which were supposed to bring prices down!

Debt on our Doorstep has therefore today written to Business Secretary, Lord Mandelson, and called for immediate action to cap Provident's prices.

A copy of the letter can be downloaded from http://www.debt-on-our-doorstep.com/files/letter to Mandelson.pdf

Transact members again vote rate ceilings as a priority for action

2009-10-12T16:26:00.002Z

Transact members have again registered their support for interest rate ceilings to be introduced into the U.K as a matter of urgency. Over 40% of all members voting in the last survey put interest rate ceilings in their top three priorities. Only securing a universal right to basic banking (57%), expanding credit unions (52%), and a national roll-out of money guidance (45%) scored higher.

Transact has 1500 members, of which 265 completed the survey. This indicates that we have the support of at least 108 consumer agencies in the UK for our campaign on rate caps.

Government consults on Debt Management Plans but County Court IT systems hold up delivery of real assistance for debtors

2009-10-07T21:12:00.004Z

The Ministry of Justice, Department for Business, Innovation and Skills, and the Insolvency Service have launched a joint consultation over the potential need to place debt management plans on a statutory footing in order to improve the assistance to indebted households. At the present time many people in debt enter into voluntary debt management plans but are unable to get a proportion of their debts written off as they may be able to through a statutory scheme. As a result many of the Debt Management Schemes that are entered into are not sustained.

In the consultation paper, Government also indicate that other possible sources of assistance - which formed part of the Tribunals, Courts and Enforcement Act 2007, such as Enforcement Restriction Orders which would have provided people with the opportunity of obtain a moratorium on debt recovery for up to a year - will not now be implemented until 2011 at the earliest due to the need to replace County Court IT systems.

Dood will be making a full response in due course, but the delay over the introduction of Enforcement Restriction Orders is clearly disappointing and fails to fit with Government's commitment to provide 'real help now'. Alternative approaches may therefore need to be found - for example by the Treasury insisting that lenders who have received tax payer bail outs now offer moratoriums on debt collection for up to 12 months where someone has recently been made unemployed.

Dood issues new seven point plan to reform financial markets

2009-09-30T17:49:00.006Z

Debt on our Doorstep has today called for the Treasury to place more emphasis on protecting consumers in its strategy to deal with the financial crisis and to increase financial stability. In particular, Government should now legislate to allow the FSA and OFT to cap the cost of credit where it is apparent that these are reflective of high risks or where there is a failure of competition.

The paper also argues that Government cash used to bail out the banks must be diverted to those that need it most including homeowners with little or no equity, rather than to the wealthy who are the only ones currently benefitting from historically low bank base rates.

And noting that many people will now be defaulting on credit agreements and facing insolvency through no fault of their own, Debt on our Doorstep has also called for an immediate review of insolvency legislation and credit scoring mechanisms to ensure that people affected by the recession are rehabilitated back into mainstream financial services as soon as possible.

The full paper is available here

Cap the Total Charge for Credit not APR's

2009-09-23T13:20:00.006Z

Recent discussions over interest rate caps have included concerns that DWP Growth Funds are being used by credit unions and community development finance institutions ('CDFIs') to lend out at APR's of between 30% and 40%. Because these lender's aren't driven by profit motives, it has led some to argue that interest rate caps would not be a practical means of delivering fairer prices to low income borrowers and that they would drive all types of lenders out of business.

In fact there is no reason why price ceilings would not be an effective means of ensuring people aren't ripped off in uncompetitive credit markets including home credit or payday lending. Uncompetitive markets allow lenders to mark up prices over and above where they would be under normal market conditions. They therefore make excess profits. Caps can be used to reduce prices to the level where normal profits would be made - but should not be used to eliminate point profit altogether.

The question therefore is where to put the cap, not whether it could work in principle. Capping the price of credit is more complicated than in other markets simply because the APR measurement of price is subject to vagaries. It is skewed against short term lending. The shorter the term of the loan, the higher the APR. As a result, a cap on the APR% could result in lenders simply lengthening the term of their loans in order to bring down the headline % figure.

So let's focus on a different measurement of price - the total charge for credit. Provident Financial, the UK's largest door to door lender with over 50% of the market, charge about £65 for every £100 borrowed. That’s a Total Charge for Credit (TCC) of 65%. Payday lenders typically charge between 15% and 33% total charge for credit on the first month, but this figure doubles each time the loan is rolled over. As for credit unions and CDFI's, well APR’s of 30% to 40% may sound grim, but the total charge for credit on these loans lies between just 8% and 10%.

We need to forget APR’s in this debate and support a cap on the Total Charge for Credit at somewhere around 20%. That would deliver real savings to low income borrowers and wouldn't put non exploitative lenders out of business, but it would ensure that Provident, for example, were no longer able to benefit from a lack of effective price competition and it would limit payday lender irresponsibility.

Of course, there are alternatives to capping - for example by encouraging greater competition in the first place. But since the financial crisis has hit this is likely to take anything between four and ten years to happen. And it's already been 6 years since we first highlighted the lack of effective price competition in the door to door lending market, during which time by the Competition Commission's calculations around £0.5 billion has been taken out of the poorest communities in excess profit.

So let’s not wait another decade to deliver fair prices. And let's not divide those that are on the side of low income borrowers – we know where the real problems lie. A united campaign for a cap now could make all the difference!

OFT publishes draft guidance to prevent irresponsible lending

2009-07-30T17:15:00.002Z

Debt On Our Doorstep today welcomed the draft guidance on responsible lending published by the OFT.

Presenting his initial reactions to the document, Damon Gibbons, Chairman of Debt On Our Doorstep, commented:

“This draft guidance is a huge step forwards for consumers. If implemented as currently drafted it would require lenders to make a proper assessment of a borrower’s ability to repay prior to granting a loan. We know that at the moment many lenders fail to make effective checks before lending, preferring to trap people in a cycle of increased borrowing. In the long term this has devastating consequences for low income households and communities.

“The OFT is to be applauded by putting forward such robust proposals to deal with this problem and we look forward to working with them over the coming 12 week consultation period.”

Barnardo's slams Provident rates of 545%

2009-07-29T12:04:00.003Z

Barnardo's 'Breadline Britain' report, published yesterday, rightly slams Provident's 545% APR loans to some of Britain's poorest families as 'extortionate'. The report comes on the same day that Provident announced a rise in pre-tax profits in the first six months of the year and following admissions from Provident Chief Executive Peter Crook that one of the effects of the credit crisis has been to drive people previously catered for by cheaper lenders to the high cost end of the market.

But what is to be done about the problem? The OFT has today published it's Financial Strategy Action Plan which contains, amongst other things, an acknowledgement that competition in our credit markets has been curtailed by the crisis and is failing to deliver a fair deal for consumers.

That comes as no surprise. In 2006/07 the Competition Commission investigation into door to door lenders found that nearly £100 million in excess profits were being made by firms in this market. But with competition weakening, the Commission's own remedies, which largely relied on people being able to build up a credit record and move onto cheaper, more mainstream types of borrowing, have failed to address the problem. The movement is all the other way.

We now need urgent and direct action to address this failure. As part of its plan, the OFT is reviewing the high cost credit market and rightly considering the case for a cap on credit charges. In our view, this cannot come too soon and we will be submitting evidence on this issue to the OFT in late August. But the real need now is for supporting agencies to lobby their M.P's to support the introduction of legislation to cap credit costs before the next general election. If you are able to help with the campaign, please get in touch by e-mailing info@debt-on-our-doorstep.com

BERR Consults on Consumer Credit Directive

2009-04-28T15:21:00.003Z

The Department of Business, Enterprise and Regulatory Reform is consulting on the implementation of the Consumer Credit Directive. The consultation, which was launched with little fanfare on the 14th April, will run for only 8 weeks (as opposed to the usual 12), in order to provide lenders with a longer lead in time to accommodate any changes.

The UK process for implementation of the Directive has been dominated by industry interests, with 'expert groups' established comprising of industry representatives whilst consumers have been provided with few opportunities for input. The curatiled consultation period will once again put them at a disadvantage in making their response.

The consultation document is available from http://www.berr.gov.uk/files/file50962.pdf

The Directive covers:

the information that must be provided to consumers at pre-contract, contract, and post contractual stages

information to be included in advertisements

early repayment

APR calculation

a duty on lenders to provide adequate explanations of the credit offer

an obligation to check the creditworthiness of the consumer

the right for consumers to withdraw from an agreement within 14 days

OFT consults on Financial Sector Strategy

2009-04-08T12:50:00.002Z

The OFT has launched a consultation on its proposed financial services strategy which sets out its approach to the sector in response to the current economic crisis, and also announced a review of the unsecured consumer credit market.

The OFT is asking interested parties to comment on its proposal to focus on two inter-related themes:

• The prioritisation, in the short term, of promoting fairness and responsibility between the credit industry and consumers, and

• advocating choice and competition to ensure that public decisions made to deal with the current crisis do not harm competition in the long term to the detriment of consumers.

The consultation will run until 12 June 2009, and the consultation document can be downloaded here.

A review of the unsecured credit market is also being scoped out, with details available from:

www.oft.gov.uk/oft_at_work/markets/services/credit-sector/.

Comments are currently being invited concerning this until 8th May, with the full review expected to start in the summer.

Global Coalition for Responsible Credit calls on G20 leaders to create a financial system ‘worth saving’

2009-03-30T19:35:00.003Z

Debt on our Doorstep, with support in the UK from the trade unions UNITE and PCS, the New Economics Foundation, Church Action on Poverty, the National Housing Federation, and former Cabinet Minister and Chair of the Labour Party Ian McCartney M.P, and with the support of a Global Coalition for Responsible Credit comprising the European Coalition for Responsible Credit, the U.S National Community Reinvestment Coalition, and partners in twenty other countries, today issued a call for the forthcoming meeting of the G20 to commit itself to the creation of a financial system that is worth saving by:

Agreeing to place financial services providers under a ‘duty to exercise responsibility in financial services’. Financial services providers need to be required to sign up to clear principles of responsibility and to have transparent mechanisms in place to ensure that these principles guide their behaviour in practice. Remuneration policies need to be reassessed in the light of this ambition. The responsibility should include a requirement for financial services providers to properly consider the needs of all households, including those on low incomes, when designing financial products

Ensuring taxpayer investment in the banking system is turned into real help for people in financial difficulties, by agreeing actions to force lenders to offer to reschedule the liabilities of households in debt over the long term at affordable rates

Committing to take further action to stop home repossessions and ensure lenders offer affordable mortgages to people in negative equity and/or mortgage arrears, and to work to stabilise housing costs in the longer term by increasing the supply of affordable housing.

Chair of Debt on our Doorstep, Damon Gibbons, commented:

“Financial services providers have engaged in irresponsible and usurious lending, causing households to become increasingly vulnerable to economic shocks and saddling them with unsustainable levels of debt. We call on the G20 to signal a decisive break with the short termism, greed, and irresponsibility that have caused the current crisis and to take action to ensure that taxpayer investment in the banking system is now used to create a system that benefits people.”

Supporting the work of the Global Coalition, Andy Case, a National Secretary for Unite, the UK’s largest trade union with 2 million members, including 178,000 working in the Finance Sector, said:

“The current situation provides an opportunity to re-build a financial system that supports a long-term outlook and is consistent with democratic aims, financial stability and social justice."

Protecting low income borrowers in the credit crisis

2009-02-14T12:44:00.004Z

Debt on our Doorstep and Ian McCartney M.P have now finalised their report on measures that government can be taking to protect low income borrowers in the credit crisis. The full report is available from the link below.

The report has now been submitted to the Department of Business, Enterprise and Regulatory Reform and the Treasury and we are hopeful of a meeting in the near future.

In the meantime, the proposal to cap prices in non-competitive areas of the credit market is gaining further support with Transact members voting this as one of their top three priorities for action in a survey at the end of 2008. Following the Transact Annual conference London in November, we understand that there will be a number of regional debates organised on this issue in Spring 2009.

Protecting low income borrowers in the credit crisis

Government urged to bring forward introduction of enforcement restriction orders

2009-02-14T12:31:00.002Z

Debt on our Doorstep and John Battle M.P have teamed up in a bid to get government to bring forwards the introduction of enforcement restriction orders. The Tribual, Courts and Enforcement Act passed by Parliament in 2007 contains provisions for the county courts to make the orders were a debtor's financial circumstances have significantly worsened since taking out credit, and allow for debt recovery action to be suspended for up to 12 months. With rapidly rising levels of redundancies and unemployment, the orders would provide real help now to many households struggling to cope with the recession.

However, following a parliamentary question from John Battle to Bridget Prentice at the Ministry of Justice, it would appear that the introduction of enforcement restriction orders is not scheduled until 2010.

We believe that is far too late and urge government to act now.

John has put down an Early Day Motion on the subject which is available from the link below. Please write to your M.P and urge them to add their signature.

http://edmi.parliament.uk/EDMi/EDMDetails.aspx?EDMID=37814&SESSION=899

Ian McCartney M.P to work with Dood on Rate Cap proposal

2008-11-30T17:34:00.003Z

Ian McCartney M.P today announced his intention to work with Debt on our Doorstep in order to develop a proposal to introduce a system of interest rate caps, which he will submit to the Chancellor, Alistair Darling, and Business Secretary, Peter Mandelson at the end of the week.

The announcement came during a live interview on the BBC's Politics Show, North West, in which Damon Gibbons, Chair of Debt on our Doorstep also took part.

The full show can be viewed from the following link, with the coverage from the North West starting 33 minutes in.

http://www.bbc.co.uk/iplayer/episode/b00fvxd1/The_Politics_Show_30_11_2008/

Show your support for the 'London Declaration' on the Global Credit Crisis

2008-11-22T16:22:00.003Z

London Declaratation on the Global Credit Crisis - all agencies urged to indicate their support by signing at http://www.responsible-credit.net/index.php?id=2738

Text of the Declaration follows

Introduction

On 13th November 2008, two hundred delegates drawn from twenty six countries gathered in London to discuss the global credit crisis. The conference recognised that taxpayers all over the world are now being required to foot a mounting bill to rescue banks and financial institutions. Yet, it is households who are feeling the worst effects of the meltdown in the global financial system. Consumers, who have been encouraged to take on excessive housing and consumer debt, are now struggling to avoid repossession and insolvency, savings and pensions are threatened, and unemployment is rising.

Our discussions were informed by the Council of Europe's Recommendation (Rec/(2007)8) concerning legal solutions to debt problems, which sets out a framework for Member States to#

Provide measures that will prevent over-indebtedness
Alleviate the effects of debt recovery, and
Rehabilitate over-indebted individuals and families

There was widespread support for the Council of Europe's framework at the conference, but also recognition that in many Member States the measures that were currently in place failed to take account of the crisis situation now facing households.

Delegates therefore supported the making of the following declaration

The London Declaration

We, the European Coalition for Responsible Credit, with the support of our partners around the globe, call on our governments, financial regulators, and central banks, to take immediate action to support households in financial problems and to work with us and other consumer and social agencies, academics, and the labour movement to establish a new framework for the governance of credit markets at the international, European, and national levels.

The current crisis is a product of the long term neglect of consumer interests in the credit markets and inadequate regulation of the financial services industry. Over the past twenty years we have witnessed the continued weakening of consumer protections in the name of supporting free and efficient markets. The failure of this approach in the credit market is now self evident. This is not a crisis borne from providing access to credit to low income groups, but it is a product of providing them with irresponsible credit products and failing to protect their long term interests in the market.

We call on all governments across Europe to

Improve help available to households in mortgage arrears, by

Establishing, with the financial services industry, ‘mortgage rescue funds’ for households that can be used to help borrowers restructure mortgages at affordable rates of interest over the next five to ten years

Providing courts with the power to halt the repossession of homes and to restructure mortgages by accessing ‘mortgage rescue funds’

Enhance court protection for borrowers with unsecured debts, by

Providing for borrowers to obtain, on their own application, a temporary moratorium on recovery action for up to one year, subject to judicial discretion

Preventing unsecured lenders from obtaining legal charges on homes

Ensure adequate provision of debt advice services by developing and implementing, with the active involvement of consumer and social agencies, a national debt advice plan. The plan should be developed following the commissioning of independent research into the demand for, and supply of, debt advice provision and current funding levels for advice services

Include a duty in bank and credit licenses obliging lenders to ensure people on lower incomes have access to responsible credit products, and which requires lenders to report in a standardised and public way on their performance in meeting this obligation

Improve governance of credit markets by actively involving consumers

Ensure that consumer and social agencies are represented on key policy making and supervisory bodies at the global, European, and national levels

Provide financial support to enable consumer and social agencies to participate in an ongoing dialogue with regulators and the financial services industry at the global, European, and national levels

Develop a quasi bankruptcy procedure for banks which instead of just applying the principle of "too big to fail" provides the intervening State with the right to replace management, to adjust claims and to protect public interest in failing financial institutions without harming the well-functioning of the bank's systems with regard to the markets. Public guarantees and subsidies to banks should be given only with the obligation to act responsibly towards consumers and to return the money after it is no longer necessary to keep the bank from failure.

Signed this 13th November 2008

Professor Udo Reifner

Chair, European Coalition for Responsible Credit

Responding to the Mortgage Crisis

2008-11-22T15:19:00.003Z

With repossessions at their highest level since the housing market crash of 1991, and more than 30,000 people set to lose their homes on current trends before next April, a new report from the Centre for Economic & Social Inclusion argues that radical measures should now be taken to help hard pushed borrowers reduce mortgage payments and to improve court protection against repossession.

The report highlights the fact that the cost of mortgage repayments, relative to household income, has been steadily increasing since 2004. This has now been combined with a ‘de-coupling’ of mortgage rates from bank base rates as a result of the global financial crisis – causing the cost of borrowing to rise rapidly, a surge in arrears, and a rush to repossession by lenders who have also seen house prices fall dramatically.

Pointing out the more pro-active approaches now being taken by regulators in the U.S where ‘loan modification’ programmes are now being introduced to ensure no-one pays more than 34% of their income on mortgage repayments, Damon Gibbons, Head of Policy and Partnership at Inclusion, commented:

“Restoring mortgage affordability is critical to reducing the number of repossessions. There is a strong case for government to insist that banks introduce a mortgage restructuring scheme in the U.K in order to achieve this. The new UK Financial Investment Company should ensure it uses the £37 billion of taxpayer investment in Britain’s banks as a lever to achieve this.”

The full report is available here :

http://www.debt-on-our-doorstep.com/files/Responding%20to%20the%20Mortgage%20Crisis.pdf

Transcript of speech to Transact Conference

2008-11-22T14:53:00.003Z

A copy of the speech given by Damon Gibbons, Chair of Debt on our Doorstep, to Transact's National Conference on 21st November concerning the problem of credit dependency and the need for interest rate caps in the UK is now available from the following link

http://www.debt-on-our-doorstep.com/files/Speech%20to%20Transact%20Conference%20Gibbons%2021st%20November

Jim Devine M.P puts down Bill to limit interest rates

2008-11-16T09:25:00.003Z

Jim Devine M.P (Labour, Livingstone) has put down a ten minute rule bill to limit interest rates on consumer credit contracts. The Bill is also supported by other Labour backbenchers including Jon Cruddas. First reading was on 12th November and details can be found here

http://services.parliament.uk/bills/2007-08/interestratesmaximumlimit.html

We urge Debt on our Doorstep supporters to write to M.P's asking them to support Jim's bill.

Damon Gibbons, Chair, Debt on our Doorstep will also be speaking at Transact's National Conference on 21st November to debate the issue of interest rate limits. This follows a survey of Transact members last year in which rate caps came top of their list of measures that should be implemented in order to make a difference to people on low incomes.

Finally, GMTV begins two days of publicity tomorrow to highlight the costs of predatory lending by door to door (home credit) and payday lenders.

Why cutting VAT could now be on the agenda

2008-10-16T12:05:00.003Z

With the rise in unemployment figures released yesterday, and continuing long term downturn in consumer confidence affecting retail spending and small business, it may be that the time has come to consider cutting one of the most regressive tax schemes currently in place - VAT.

Calls have already been made this year for government to cut VAT on maintenance and home improvement work as a means to encourage homeowners to carry out energy efficiency measures and contribute to carbon reduction - see http://www.fmb.org.uk/cutthevat/(e4xgrh55hgjfox45er31qiq1)/default.aspx for details.

In his last speech as Chancellor, Gordon Brown also called on the EU to cut VAT on 'green goods' to 5%.

But a wider VAT cut may have advantages over tax rebate strategy that has been put in place by the Bush administation and which was echoed in comments made by the TUC's Brendan Barber in an interview with Channel 4 news last night.

As we highlighted earlier this year on this blog, one of the key theoretical advances made by the monetarist economist Milton Friedman was his exposition of the 'permanent income hypothesis' which dictates that households will not be encouraged to spend by income tax cuts whilst they are fearful for their jobs and long term position. As a consequence, VAT cuts have a distinct advantage - the benefits of them are only realised in the act of spending. To get the benefit of lower prices, you have to buy. They also have a real advantage in redistributing income to the poorest who spend a greater proportion of their income on VAT than higher income households, especially if the VAT regime is rebalanced in order to provide the largest cuts in the VAT rate on those goods which the poorest need and buy most.

If government is seeking to boost the economy and consumer spending then the measures we set out in our post earlier this week - an income based mortgage interest credit, central bank control over new long term mortgage and consumer lending rates, compulsion for banks to lend, discretion for courts to reschedule mortgages that are in arrears, and a cut in the VAT rate could form the basis of a solution.

Banking on Change - Can we build a sane future?

2008-10-14T01:45:00.004Z

The action of governments and central banks across Europe and in the U.S to save the financial system from complete collapse is without a doubt one of the most significant economic and political events since the second world war. But it would be foolish to think that this crisis is anywhere near over. In fact, we may simply be entering a third phase in which we witness the impacts start to spill over into the real economy - resulting in more lost homes and rising unemployment.

The primary reason for continuing alarm? The causes of the credit crisis have not been addressed. We perhaps need to remind ourselves that neither the mass movement of bank deposits or the loss of liquidity in the banking system was the initial cause. Both of these were second order problems. They only arose because of falling values in the U.S - and by extension uncertainty in other national - housing markets. This 'trigger' remains in place, creating a prisoner's dilemma for banks.

Simply put the prisoner's dilemma is this - with so many people now in need of remortgaging at cheaper rates in the U.S, which one of the banks will be the first to take the risk on by offering them loans? The answer, clearly is none will do so for fear of attracting the most risky customers - after all just as the market knows that those banks accepting loans from government are in the worst problems, the banks know that those customers most desperate to reschedule home loans are likely to have the most problem repaying. This 'adverse selection' in credit markets was recognised long ago.

Two immediate actions need to be taken to resolve this. Firstly, households in the most difficulties need helping and fast. Secondly, central banks have to break the prisoner's dilemma by placing 'strings' on their assistance.

How can households be helped? - Debt on our Doorstep calls on government to consider introducing a 'housing interest credit' for low income families, which provides interest relief at source on mortgages and is paid on a sliding scale according to income. That will provide instant assistance to households struggling with increased fuel prices, and rising inflation but will ensure that it reaches mortgage repayments and reduces the risk of arrears. The Obama campaign has something similar in its economic proposals in the U.S at the moment.

Government should also legislate to amend S.36 of the Administration of Justice Act 1970 and S.8 of the Administration of Justice Act 1970 - the legislation which currently provides court's with powers to help borrowers facing repossession proceedings. The current law does not allow judges to reschedule mortgage agreements to ensure that people can retain their homes. They should be provided with the discretion to do so. Again, these measures are being supported by Democrats and community groups in the U.S.

But fundamentally the prisoner's dilemma in banking needs to be broken. To do this, banks must be forced to put out greater amounts of capital on loan to support mortgage and consumer credit restructuring for households over the next five years. Long term loans need to be made available to the banking industry from central banks to support this but banks must pass on this funding at fixed rates and terms established by the central banks to consumers. In effect the central bank will be setting the terms on which loans are to be provided to consumers, with banks simply acting as the intermediaries. Such is the lack of trust which can be afforded to Britain's banks.

Over time, such a direct mechanism can be relaxed provided the regulatory framework under which credit is provided in future is revamped and ensures that incentives are in place for responsible lending to take place and long term, ethical, relationships between consumers and lenders fostered.

That regulatory framework now needs to be constructed with the active participation of consumer agencies and representatives in partnership with banks and government. Our conference, which will take place on 13th and 14th November in London provides a seminal opportunity to begin those discussions. Further details can be found at

http://www.cesi.org.uk/events/current_events/responsible_credit_conference.htm

Please note that we have also secured up to 50 half price places for not for profit agencies to attend these discussions.

BBC One reports on the growing payday loans scandal

2008-09-27T10:38:00.001Z

BBC's 'the One show' yesterday highlighted the growing problem of payday lending in the UK. You can watch the clip from the link below

http://www.bbc.co.uk/blogs/theoneshow/consumer/2008/09/26/payday-loans-never-a-borrower.html#comments

Channel 4 Exposes Lies of Payday Lenders

2008-09-10T18:25:00.003Z

Channel 4 News has exposed the irresponsible lending of payday lenders, which offer high interest loans without checking whether or not borrowers can afford to repay and without bothering to check basic details such as earnings, before offering to extend loans for up to 6 months.

Commenting on the footage, Damon Gibbons, Chair of Debt on our Doorstep said:

"Channel 4 must be congratulated on bringing the reality of payday lending to light. Lenders are constantly telling us that they are responsible and comply with guidance from the OFT and their trade associations. This report reveals that this is simply not true. We hope that the Office of Fair Trading will look carefully at the footage and consider what restrictions now need to be placed on payday lender's consumer credit licenses."

The coverage is available from the link below starting 5 mins and 40 seconds into the clip entitled Payday Loans (broadcast on Tuesday 9th September)

http://link.brightcove.com/services/player/bcpid1529573111

OFT launches consultation on Responsible Lending

2008-08-06T13:58:00.003Z

The Office of Fair Trading has announced the start of a year long project looking at responsibility in lending, and published a scoping paper for consultation. This is available from the OFT from the link below with a deadline for responses of 24th October 2008.

http://www.oft.gov.uk/shared_oft/business_leaflets/consumer_credit/oft1012.pdf

Dood supporters are encouraged to respond to the consultation arguing for the widest possible remit to be given to the project, in order to allow it to investigate and make recommendations on all matters from advertising, through to lending decisions, and decisions concerning recovery action. We will be examining the issues in more detail over the period of the consultation and will issue further news and views on the website in due course.

Responsible Credit Conference 2008

2008-08-01T16:13:00.002Z

This year's Responsible Credit conference, organised by the European Coalition for Responsible Credit with partners including the National Community Reinvestment Coalition (U.S) and the Centre for Economic & Social Inclusion ('Inclusion') , is now open for bookings on the Inclusion website -

http://www.cesi.org.uk/events/current_events/responsible_credit_conference.htm

The conference is taking place in London on 13th and 14th November and will attract over 350 delegates from aroud the globe to dicuss the current credit crisis and its impact on consumers. Confirmed speakers already include Martin Wolf, CBE, Chief Economist and Associate Editor, Financial Times; Paul Lewis, BBC Moneybox; and Lindsay Tucker, Director, International Community Relations, Citi together with ECRC Chair, Professor Udo Reifner and NCRC Chief Executive and President, John Taylor.

U.S Payday lenders lied on petition

2008-06-24T07:31:00.003Z

Payday lenders are currently facing a torrid time from state legislators in the U.S with several pursuing interest rate caps on payday loans. In Ohio, the state senate has voted to cap at 28%, and payday lenders are petitioning for a public vote on the issue in an attempt to overturn this. However, this appears to have hit the buffers as they have been found to have mis-represented the facts on the proposed petition.....

From The Plain Dealer: Cleveland, Ohio. 24th June 2008

Here's a stunner: Payday lenders resorted to falsehoods in their desperate attempt to continue gouging Ohioans with 391 percent interest rates.

That's what Ohio's new attorney general, Nancy Rogers, rightly concluded about language payday lenders wanted to use in asking voters to overturn a new law that caps their annualized interest rates at 28 percent.

Rogers ruled last week that payday lending supporters were not truthful in language they wanted to use on petitions aimed at forcing a November vote on the new law. Other parts of the language, she added, were also "inflammatory and unfair."

Leaders of the Reject House Bill 545 Committee need nearly 250,000 valid signatures to earn ballot status. But they cannot begin that process until Rogers approves the petition language. Last week's ruling requires payday lenders to rewrite and resubmit it.

No one should be surprised that an industry that drives desperate people deeper into debt by dangling short-term loans at disgustingly high interest rates would try to trick voters with deceitful language. Expect more of the same if this issue makes it to the November ballot.

Debt on our Doorstep network launched in Knowsley

2008-05-11T05:44:00.002Z

Following a successful event in February, agencies in Knowsley have now established a local Debt on our Doorstep campaign network. The campaign will initially focus on payday lending activities in the area, but they also report the remarkable development that United Utilities in their area will be using Brighthouse, instead of the post office, for people to pay their bills from 1st August onwards!

We wish the Knowsley network every success in their campaigns and welcome similar moves to establish local Debt on our Doorstep campaigns in other areas. If you are interested please contact us

Credit in Crisis - Why we need Banking for People

2008-05-11T05:38:00.002Z

A major international conference on the credit crisis and its implications for consumers will be taking place in London on 13th - 14th November 2008 at the New Connaught Rooms, Covent Garden.

The conference is supported by the European Coalition for Responsible Credit, US partners the National Community Reinvestment Coalition, and UK agencies the Centre for Economic and Social Inclusion ('Inclusion') and Debt on our Doorstep and sponsorship from Citibank.

The organisation of the conference is being handled by Inclusion, and further details of the programme and booking arrangements will be available shortly.

Stop the Payday Lending Scandal - Write to your M.P

2008-04-13T14:39:00.004Z

We have now created an easy way for you to e-mail your M.P asking them to support Early Day Motion 1280 - Affordable Credit, which David Drew M.P has tabled. The whole process takes only two minutes of your time!

We need as many people as possible to participate. To help, click here

Many thanks

Debt on our Doorstep

Darling urges action on mortgages - but no proposals yet

2008-04-12T21:19:00.002Z

Alistair Darling today called on banks to recent cuts in the UK's bank base rate to mortgage borrowers. Speaking in Washington, where the Chancellor is attending an international summit of finance ministers, he called for banks to do "everything possible" to help borrowers struggling with mortgage repayments, and promised that Government would play its part with "nothing ruled out". However, there is an absence of specific policy proposals at this stage.

Darling's statement comes on the heels of a warning from the Council of Mortgage Lenders that lending could be reduced by as much as 50% this year. The lack of credit available is now an urgent matter which needs to be addressed. The injections of capital from central banks, including the Bank of England, have virtually matched the scale of losses suffered by banks since the financial crisis surfaced at approximately £420 billion. Yet these funds are simply not being passed on by banks to households. Instead, banks are now hoarding these cheap funds. Banks are also now hiking up their lending rates to those remaining households that they consider good risks in order to recoup some of their losses.

Two specific policies need to be adopted to ensure households are helped to manage the impacts from this crisis going forwards.

Firstly, any further access to cheap funds from the Bank of England must be made contingent on the submission of a satisfactory plan to improve access to affordable credit for households. Specific conditions should be attached to Bank of England funds which could include requirement for banks to inject the funds into the mortgage market or that they be used to support households needing to reschedule their existing commitments. Critically, conditions must be placed on banks to limit the cost of future mortgages and loans and that limits be clearly linked to the Bank of England base rates (expressed as bank base rate + x%).

Secondly, Government, the Bank of England, and the FSA should develop a joint plan for ensuring access to affordable credit in the UK. Changes should be made to the licensing conditions for banks so that they are required to demonstrate how their bank serves the needs of low income households and how it is contributing to the overall target. Banks should be publicly rated on their achievement and the regulator empowered to take action where performance is unsatisfactory.

Parliamentary Support for Payday Investigation Gathers Pace

2008-04-04T06:42:00.002Z

Parliamentary support for an investigation into the growth of payday lending, and other forms of extortionate borrowing, is gathering pace. David Drew's Early Day Motion, supported by Debt on our Doorstep has already attracted the support of 29 M.P's within only three days.

The Early Day Motion - number 1280 reads as follows:

That this House notes that the global credit crunch is now impacting on the ability of UK consumers to obtain access to affordable credit; notes that high cost and irresponsible forms of lending such as pay day lending, which charges in excess of 1,000 per cent. APR and traps people on lower incomes in a cycle of credit dependency, are now expanding rapidly as a result; further notes that Dollar Financial, one such US pay day lender, now has over 200 Moneyshop stores providing these loans in the UK; regards this development as extremely worrying for the Government's ambition to eradicate child poverty; and urges the Treasury, the Department for Business and Regulatory Reform, the Office of Fair Trading and the Financial Services Authority to conduct a joint inquiry into the growth of high cost lending, including pay day loans, in order to inform future regulatory action against irresponsible and high cost lenders and to contribute to the Government's aim of ensuring greater access to affordable credit.

You can view the signatories to the motion here.

Stop the Payday Loans Scandal - MP's to lodge concerns

2008-03-30T09:54:00.006Z

David Drew, M.P, will tomorrow lay down an Early Day Motion supporting Debt on our Doorstep's call for an investigation into the Payday lending industry in the U.K. The move follows the excellent response from supporters to our own petition on the Number 10 website, which obtained 460 signatures in just over two weeks.

Obtaining the support of MP's is now a vital part of this campaign, and we ask that all supporters write to their own M.P requesting that they put their name to the motion. We will provide a standard means of doing this from this website in the next few days.

In the meantime, a briefing on the Payday lending industry has been prepared, as below.

Payday Lending in the UK: Background Note

1.1 Pay day loans are provided to people in employment, with bank accounts, and operate by the lender accepting a post dated cheque (usually of £100) from the customer which is dated to the forthcoming pay day. A cash advance is then made of between £71 and £85, depending on the lender’s terms (see table below for details of lenders in this market). The difference between the amount of the advance and the £100 is the fee charged by the lender. Multiple cheques are accepted at the same time, with lenders offering up to a £750 - £800 to new customers. So, for example, a new customer would provide 8 cheques to the lender, each of £100, and receive a cash advance of £640 (the difference of £160 being the fees charged that will be collected by the lender on the customer’s pay day). APR’s on the agreements are typically in the region of 1200%, although one lender states that they can rise as high as 9899% .

1.2 Customers are given the option to ‘roll over’ the cheques if they cannot afford to have them cashed against their accounts when the pay day comes around. To do this, the customer must pay another set of fees direct to the lender at the same rates as the initial agreement. So, in our example, the £800 liability could be deferred for another month by the customer paying a further £160 in fees. Rolling over loans is particularly problematic as no amount is being paid off the original liability. For example, after just 5 months of paying £160 per month in fees (total of £800), the original liability of £800 would still be outstanding in full.

1.3 The table on the following page details the main brands and companies involved in the provision of Payday loans in the U.K, and the main terms and conditions of their loans.

1.4 Some, but not all, lenders restrict the amount of times that loans can be rolled over in this way, and have policies in place that require at least some payment off the capital amount to be made once a loan has been rolled over more than two or three times. However, there are no details given as to the amount of payment that is required to be made towards the capital in order for further rolling over to take place, so debts can still be rolled over many times prior to being cleared.

1.5 Lenders frequently advertise the fact that no credit checks are required and that money is available quickly. No assessment appears to be made of a customer’s ability to repay. Application forms do not generally ask for any details concerning expenditure or outstanding debts of borrowers. It is likely therefore that these loans would fall foul of any reasonable definition of ‘irresponsible lending’ – a term included in the Consumer Credit Act 2006 that the OFT must consider when licensing credit providers from 6th April 2008.

1.6 There is an absence of published information concerning the size of payday lending operations in the U.K. However, the expansion of Moneyshop stores over the past 12 months, the entry into the UK of QuickQuid in the third quarter of 2007, U.S takeover of Month End Money and the significant increase in internet sites and financial brokers offering payday loans over the past 12 months indicates that the sector is growing rapidly.

1.7 Dollar Financial, owners of the Moneyshop brand, report that their U.K. business realized growth of 71.7% in 2007 and that U.K. loan originations increased by 55.3% or $34.5 million in that year. They have 221 company operated stores in the UK, and a further 193 operated under franchise, which is approximately 25% of all payday lending outlets in the UK . 2007 third quarter accounts indicate that approximately £16 million is put out on loan each month in the UK. We estimate that a customer base of approximately 150,000 - 200,000 people would include what be required to sustain this. Assuming that the outlets of competitor lenders have similar reach, then this would suggest a market of approximately 600,000 - 800,000 people although recent developments including the increased availability of payday loans on the internet may mean that this is a conservative figure.

1.8 The advertising of payday loans on many websites is often deliberately vague and fails to provide essential information, such as the APRs, and the impacts of rolling over loans on these. In some case advertising may breach the relevant regulations. For example, the website for Quicksilver payday loans, a brand of MEM Consumer Finance Ltd., contains the following statement:

“Payday loan companies are required to calculate the APR% for their customers even though the measure is inappropriate for 30 day (i.e. very short term) cash advances. We’ll calculate it when you go through the application process…”

MEM Consumer Finance Limited also launched a TV advert in December 2007, which is running throughout 2008, under the brand name Payday Now!. This fails to mention the APR of loans at all.

Main Payday Lenders in the UK - Terms and Company Information

The Moneyshop £9.99 on first cheque of £100 only – APR of 260.2%. Usual rates, and anything other than the first cheque, are charged at £14.99 and advances made of £85.01, which would bring APR’s up to approx 1,000% Owned by Dollar Financial, US company expanding in the U.K. Has over 250 stores in the UK now and in the quarter to 31st December 2007 recorded lending growth of 55.3%. The company lends approximately £2.5 million per month

Month End Money,also trading as Payday Now!, PayDay UK, Payday Store, Quicksilver Payday Loans £25 per £100 borrowed. Will lend up to £750 to new customers. APR – 1355%. The Quicksilver website states that full roll overs allowed for two months, then some element of capital repayment required in addition to the roll over fee (amount of capital to be repaid not specified). Owned by MEM Consumer Finance Limited which was acquired by US company CompuCredit in 2007 - unfortunately Compucredit’s accounts do not break down by country, so it is not possible to determine the size of the UK operation. The company has launched a TV ad in December 2007 which is running throughout 2008

Payday Express, Wageadvance.co.uk, Paydaysolutions.org.uk. £20 on each £100 borrowed. APR 1286.1% (based on 31 day month). Will lend up to £800 to new customers. Money available over the internet and paid into bank accounts within 2 days or same day (for which an additional £15 fee is charged) After 3 loans, customers can apply for an increase in the limit. Owned by Express Finance (Bromley) Ltd – Turnover of roughly £1 million per annum. Family owned firm.

Albemarle & Bond. Payday loans available up to £600. No information on website concerning charges – available from within their pawnbroking stores. A national pawn broking company with 75 outlets that has expanded into pay day lending. Company income from payday lending has increased from £0.05 million in 1996 to over £3.6 million in 2006.

Chequebook Loans. £20 on each £100 borrowed – APR 1286%. Company based in Luton, offering payday loans over the internet. Private limited company. Exempted from last accounts requirements on basis of small size. Next accounts due in April 2008.

Payday Advance UK. £29 on each £100 borrowed – no APR figure given on the website. Limits of up to £1000 for new customers. Company registered in Malta. Member of Consumer Credit Association UK.

QuickQuid. £25 - £50 charge on each £100 lent. (APR generally 1,576.5%) Website also states that typical rates range from 1351.7% to 9889.3% A subsidiary of CashNetUSA and Cash America Intl.. Only operates on the internet for UK customers – a service started in the third quarter of 2007. No figures yet available concerning take-up. Next financials released on 24th April 2008

Today's Times: Debt charities cast a wary eye on waters as loan sharks circle

2008-03-25T22:32:00.003Z

Christine Seib , The Times 25th March 2008

Doorstep lenders and loan sharks are moving into the space left by Britain's high street banks, whose tightening credit terms are leaving millions of people without access to mainstream finance.

Debt campaigners have seen hordes of clients forced to borrow at extortionate interest rates because they have had their credit cards cut off or have been refused loans as the country's biggest banks react to the global liquidity crisis.

Banks have scrapped 125 per cent mortgages, increased the minimum deposit needed for first-time mortgages and reduced credit card limits as the banks' own borrowing costs rocketed in response to a worldwide collapse in interbank lending.

Last month Egg, the online lender, cancelled the credit cards of more than 160,000 customers. Many lenders, including Nationwide, Britain's biggest building society, are charging higher rates for borrowers who do not have a 25 per cent deposit.

At the same time, Provident Financial, the country's most prominent doorstep lender, has predicted a booming 2008. The lender said this month that the number of people who fell into the “non-standard” category of borrowers had grown to about ten million.

The Financial Services Authority estimates that up to seven million people had difficulty gaining mainstream credit, and Citizens Advice reported last week that mortgage arrears problems had shot up by 35 per cent in the first two months of 2008, compared with the same period last year. Citizens Advice bureaux said that they had dealt with 215,000 new debt problems in January and February.

Doorstep lending, which usually involves small loans on interest rates of 100 per cent or more, with payments collected each week by a local agent, is legitimate, but debt charities fear that unauthorised lenders are also capitalising on the increased number of people who have found their usual lines of credit diminished or cut off.

Faisel Rahman, managing director of Fair Finance, a non-profit sub-prime lender based in East London, said: “It's a race. We can forge a new way of lending but we can assume that our competition will also move in.”

Neil Cooper, of Debt on our Doorstep, which campaigns to end high charges for sub-prime lending, said: “I'm sure unauthorised lenders will see an opportunity there, but the biggest risk is the sub-prime lenders who already have their infrastructure set up. People will be forced to go to them for very expensive loans because they can't get credit elsewhere.”

Keith Tondeur, president of Credit Action, a charity that offers budgeting education, said that many of the people who were turning to sub-prime lenders had previously been good customers of the high street banks. “People who've been able to borrow at will are now unable to do so,” he said. “This comes at the same time as rising food and fuel prices and declining asset values — it's not a pretty picture.

“There's a great core of people who've been borrowing happily for 20 years and all of a sudden that's no longer available to them.”

Case study

Luis García, 38, who asked The Times not to use his real name for fear of reprisals, repaid more than £15,000 over five years after borrowing £3,000 from a loan shark in Britain.

Unable to get a standard bank loan, the Colombian borrowed the cash in 1999 to set up a new life in the UK, but, with repayments of £450 a month, was unable to pay off the principal.

“I was paying 15 per cent on my loan, but if I couldn't pay the full £450 and gave him only £300 one month, the other £150 went on to my loan and I paid 15 per cent on that as well.”

When his lender, also from Colombia, threatened the life of Mr García's family in his home country unless he kept up the huge repayments, Mr García turned to Fair Finance.

He said that he cried with joy when the non-profit sub-prime lender offered him sufficient credit to pay off the loan shark.

Why aren't Americans spending? What would Friedman say now?

2008-03-24T21:24:00.006Z

The Bush administration's plan to get Americans to spend their way out of the economic doldrums appears to have hit problems, according to a survey of US householders conducted for CNN/ Opinion research Corp.

Only last month, the U.S congress voted through a $170 billion package to boost the economy, with $120 billion of this set to be put straight into consumers pockets in the form of tax rebates, with payments of $600 to most individual taxpayers who earn less than $75,000, and $1,200 for married taxpayers filing joint returns who together earn less than $150,000. There is also a $300-per-child tax credit.

But a survey pulished today reveals that only one in five U.S consumers are planning to spend the money. Instead 41% of those surveyed plan to use their rebates to pay off bills, and 32% will put the money in savings. A further 3% said they will donate the extra money to charity.

The survey indicates that only $24 billion of the $120 billion being handed out will actually contribute to stimulating the U.S economy.

The results are ironic, given the long standing commitment of the U.S to monetarist economics. Monetarism's rise dates back to the 1970's when nations were grappling with the failure of Keynesian economics to stimulate domestic demand in the face of the oil crisis, and inflation and unemployment were both rising.

One of the key theoretical explanations for Keynesian economics failure was contained in Milton Friedman's 'Permanent Income Hypothesis' first published in the 1950's. This stated that, rather than modify their consumption patterns in line with temporary increases or decreases in income, people would use credit to smooth out these fluctuations over their lifetime and attempt to maintain a constant level of consumption. Short term attempts to boost the economy - for example increased welfare payments or tax rebates - Friedman argued, would be largely ineffectual. Only changes in household's long term expectations would have an impact.

For neo-liberal administrations like those of Thatcher and Reagan, Friedman's theory - and other life cycle theories of credit that followed it in the 1960's - provided the theoretical justification for policies that deregulated credit markets, promoted home ownership, and boosted demand. Expanding credit markets meant not having to resort to the old Keynesian mechanisms of state spending, but instead relying on individual households to borrow and spend. The consequent surge in house values shifted household expectations sufficiently to encourage a cycle of increasing indebtedness and, for limited periods, economic growth.

It also provided a good basis on which to reduce traditional welfare provision throughout this period under slogans of "self-reliance", and "individual responsibility". In this sense, credit was the tool of choice for those administrations looking for a mechanism to undermine the welfare state.

But this cannot last forever. Just as this process resulted in mass repossessions in the UK in the late 1980's, so it must come to an end this time around also. At some point, as the economists Godley & Izurieta pointed out in 2003, (Coasting on the Lending Bubble Both in the U.K and U.S. Paper presented at the Annual Meeting of the Society of Business Economists, London, June 25th, 2003) household expectations begin to flatten out - they balance their debt burdens against a prognosis for the economy more broadly. Once this happens, spending slows and the cycle begins to reverse. Consumers repay debts or save rather than spend, demand slows, and asset values including house prices fall.

The evidence from the US survey indicates that consumer expectations have now been firmly realigned downwards. According to Friedman's theory, tax breaks are not going to be enough to save the US economy now.

What might help? Firstly, if Friedman's theory is right then measures must be taken that will help manage household expectations for the longer term. Short term measures are unlikely to be successful. Instead, emphasis should be placed on preventing house prices from collapsing further - putting in solid protections against repossession would be a good start.

Secondly, there has to be both liquidity of credit, and responsibility in its provision - this means ways must be found to continue to lend to households that require re-financing, but that this must be done in ways that help households in the longer term rather than simply seek to profiteer on their desperate positions. Rescue loan funds, that genuinely work with consumers to provide sustainable long term solutions would be useful. Given that so much central bank funding is now flowing into private banks, some insistence that this be used to assist households in difficulty doesn't appear to be too much to ask.

For the longer term, there needs to be a reassessment of the regulatory framework governing credit provision and a debate involving government, consumers, and the industry to determine accepted principles of responsible lending and the required rules to ensure this.

Two years after the Competition Commission - Provident's business is booming

2008-03-13T18:40:00.003Z

In our joint statement on the credit crunch, published with the European Coalition for Responsible Credit in October last year, we drew attention to the risk that, as mainstream lenders struggled with liquidity, they would start to restrict access to credit and leave more and more people at the mercy of high cost lenders such as those engaged in Payday lending and Home Credit.

Unfortunately, a recent article in the Scotsman confirms this view. 2 million people are now forced to obtain credit from doorstep lender Provident, and in their own words they accept that they benefit from restrictions on lending in the mainstream market. The associated problem, of course, is that this lack of competition from mainstream lenders means that Provident can also get away with charging sky high rates.

The credit crunch also means that many of the Competition Commission recommendations will be of little, or no effect. For example, the Commission's attempts to encourage data sharing - so that home credit borrowers could build up an improved credit score and apply for mainstream credit at cheaper rates - appear very flimsy when mainstream lenders are restricting access to all but those with the very cleanest of credit scores. Policy makers have so far been pre-occupied with the impacts of the crunch on mortgage rates - perhaps now they should start to think about the impacts on child poverty instead.

----------- Article from The Scotsman 5th March 2008 -------------------

2 million pay 100% interest on doorstep

By SHÂN ROSS

A RECORD two million Britons have borrowed money at interest rates of up to 100 per cent from Britain's biggest doorstep lender after being refused credit by high- street banks, it was revealed yesterday.

Provident Financial, which sells small loans door-to-door, said profits were up 11 per cent to £115 million. Since last year's meltdown in the US subprime mortgage market, British mainstream banks have introduced stricter rules on who they will lend to, boosting business for doorstep lenders.

Provident's home credit business, which employs almost 12,000 collection agents to make 80 million home visits a year, saw its customers increase by almost five per cent to a record 1.6 million last year.It has a large customer base in Scotland, where it provides credit to 227,086 people and has 1,772 agents. Peter Crook, the chief executive of Provident Financial, said:

"Current market conditions are favourable for us, as mainstream banks continue to tighten their lending criteria."

Government Launches Consultation on National Savings Gateway Scheme

2008-03-12T19:04:00.003Z

In a welcome development, today's budget included an announcement that the Savings Gateway - a scheme whereby the Government adds to the savings of low income households - is to be rolled out nationally.

The scheme was originally proposed in 2001 and has been through extensive pilots which have tested qualifiying criteria and the level of Government contribution to the savings accounts. Today's announcement promises that the national scheme will be available from 2010 and is linked to a consultation exercise running between now and 4th June 2008.

The consultation document is available here:

http://www.hm-treasury.gov.uk/media/D/4/bud08_saving_340.pdf

Fuel Poverty Measures Should Show the Way to Affordable Credit

2008-03-09T08:50:00.004Z

A report in today's Observer (see below) highlights the need to force energy companies to introduce 'social tariffs' to ensure that low income households can access the energy services they need at prices they can afford. Efforts to encourage the industry to establish voluntary mechanisms to look after these consumers have failed, according to the National Energy Association and Npower. The result has been an horrendous increase in the level of fuel poverty -households are defined as being in fuel poverty where they spend more than 10% of their disposable income on fuel bills.

There are lessons here for those seeking to ensure access to financial services, and to affordable credit for people on low incomes. The Financial Inclusion Taskforce is behind the game. Whereas the Government has set binding targets for the energy industry to eliminate fuel poverty in England by 2010 and across the UK by 2016, no such ambition has been set out for the Financial Inclusion Taskforce or the financial services industry to establish access to affordable credit. In fact, even the term 'affordable credit' remains undefined by the Taskforce. Despite this lack of precision, a recent mapping exercise has been conducted by the Taskforce to establish those areas of Great Britain that have the least access to affordable credit. The results are confusing as they give no indication of the level of resources necessary to solve the problem of rip off credit provision to the poor. And there is no evidence of effective pressure being exerted by the Government or Taskforce on banks to meet even those gaps in provision that have been revealed. The Growth Fund for credit unions and third sector lenders of just £45 million being devoted to this purpose is woeful in its inadequacy.

Debt on our Doorstep's research last year into the debt burdens of low income households revealed that the poorest households are paying an average of 11- 12% of their incomes on unsecured debt repayments. Using the same definition of poverty as is used in relation to fuel, that puts somewhere approaching one fifth of the population, those in the lowest income quintile, in debt poverty. As Alistair Darling approaches his budget preparations, he would do well to set out some targets and mechanisms to deal with this including a responsibility for banks to deliver services to low income communities at affordable prices.

Energy companies should be appladed for recognising the need for Government intervention to force a level playing field in the industry and to secure services for low income consumers. Now is the time for banks to accept that the financial services market requires the same medicine.

--------------------------------------

Npower admits laws needed on fuel poverty
Tim Webb
The Observer,
Sunday March 9 2008

This article appeared in the Observer on Sunday March 09 2008 on p3 of the Business news & features section. It was last updated at 00:04 on March 09 2008.

RWE Npower has privately admitted that energy companies will only tackle fuel poverty effectively if the government forces them to do so.

The energy industry has been trying to resist moves to force companies to do more to help the soaring numbers of 'fuel poor' in this week's Budget. The government has set a legally binding target to end fuel poverty in England by 2010, and across most of the UK by 2016.

But in a letter to energy regulator Ofgem in September, Npower admitted that the government's approach to date, to encourage companies to offer more subsidised or 'social' tariffs to poorer households on a voluntary, as opposed to compulsory, basis would not work.

'At present, government is encouraging the delivery of a social action solution within a voluntary framework,' the company said in the letter. 'It is doubtful whether this is the most efficient approach and it is also seemingly inconsistent with a market framework.'

It went on: 'We believe that the interest of the fuel poor is best served by a mandatory social tariff and this is the only means by which the government's 2010 and 2016 objectives can be achieved. There is no obvious reason why these targets will be delivered within a competitive retail market.'

This weekend, the government was still considering how to address fuel poverty in the Budget. The companies are expected to escape a windfall tax if they contribute a 'voluntary' levy to help those struggling to pay their bills.

Energy companies currently spend just 0.11 per cent of their £24bn turnover on tackling fuel poverty on average. Spending varies: British Gas, owned by Centrica, spends 0.49 per cent of its turnover, while Scottish and Southern Energy and Npower spend just 0.07 per cent. Many of these supposedly cheaper tariffs are actually more expensive than the tariffs offered to other customers. For example, British Gas's social tariff for gas and electricity is on average £96 more expensive per year than for ordinary customers paying by direct debit.

At the end of last month, Energy Minister Malcolm Wicks reiterated to fuel poverty charity National Energy Action that the government would not introduce mandatory social tariffs.
Jenny Saunders, chief executive of National Energy Action, said: 'It would be preferable to have a legislative framework, rather than rely on the goodwill of companies for a one-off gesture. Some companies are doing their bit but to have a genuinely socially just energy market the government will have to intervene.'

Fuel poverty is defined as a household which spends more than a tenth of its income on heating and lighting.

UK Government confirms 'Greed & Fear' as causes of credit crunch:

2008-03-09T05:13:00.006Z

Writing in 1998, Professor Susan Strange wrote that:

"“Greed and fear are the two human emotions most evident in the day-to-day behaviour of the international financial system today….Either dealers are drawn by greed to take too big risks with their own or, more often, with other peoples’ money; or they are overcome by fear that the risks they have taken will catch them out. In their rush to escape the consequences of greed, they may start…an avalanche of panic that carries away the innocent along with the guilty.” (Mad Money, pg. 139)

10 years later, the Treasury have confirmed this assessment - although they use less obvious language. Their current consultation on proposals to increase stability in the world of banking highlights the two causal factors of greed and fear in the language of the marketplace: with 'search for yield' as greed, and 'uncertainty' as fear.

The Treasury's current consultation on proposed measures to stabilise the financial services sector notes that:

"...the disruption in global financial markets in the second half of 2007 followed a prolonged period of macroeconomic and financial stability and low interest rates in the UK and globally. Historically low interest rates encouraged investors to ‘search for yield’ by investing in increasingly risky financial products without being fully compensated for the additional risks, leading to a general under-pricing of risk. Benign macroeconomic conditions and the search for yield also encouraged an erosion of credit risk assessment standards in some markets, most notably US sub-prime mortgages." (para 2.2)

and then at para 2.4:

"Although the US sub-prime mortgage market is small in relation to the global financial system, difficulties in valuing many of the residential mortgage-backed securities (RMBS) and uncertainty about where the risks associated with sub-prime mortgages had been distributed led to significant uncertainties about the losses and their impact on banks’ balance sheets."

However, rather than focusing on ensuring that lenders act responsibily in the first place, the proposals concentrate on allowing the Government, Bank of England and FSA to prop up banks that get into difficulty. Banks, it would appear, are now too big to fail - with the consequent moral hazard that means they will invariably take greater risks with other peoples' money in the future.

This is the wrong approach - act now to tighten the rules on responsibility in lending, and link the huge level of assistance currently being given to banks with additional requirements that they meet the needs of all communities in the U.K for affordable credit.

Consultation on Administration Orders: Weakening Protection?

2008-03-06T12:07:00.004Z

The Ministry of Justice is currently consulting on proposals to limit the types of debts that can be included in future Administration Orders as part of its wider review of assistance to people in debt problems, which will include the introduction of Enforcement Restriction Orders.

The consultation paper includes proposals to weaken the assistance available to debtors by excluding rent arrears, council tax, and magistrates fines arrears from future Administration Orders.

Debt on our Doorstep will be responding, and welcomes input from Money Advice Agencies and other community groups. The full consultation paper is available from:

http://www.justice.gov.uk/docs/cp0108.pdf

The deadline for responses is 16th April and we would welcome comments from supporting agencies to inform our response by 31st March.

Stop the Payday Lending Scandal - Sign our Petition

2008-02-26T21:02:00.004Z

Payday lending is growing exponentially in the UK.

U.S lenders, such as Dollar financial, have exported their business to the UK (trading here as 'Moneyshop') and now have over 200 stores in the UK. Pay day loans carry APR's of up to 1,000% and are regularly rolled over ensuring that households in financial problems are trapped into a cycle of credit dependency. Although the US pay day lending industry is subject to interest rate restrictions in their own country (including a 36% APR cap on pay day loans made to US military personnel), no such restriction on interest rates is in place in the UK.

Debt on our Doorstep have now launched a petition on the Number 10 Website calling on the Prime Minister to ensure an investigation is conducted into the UK pay day lending industry. Debt on our Doorstep is also calling on the Prime Minister to reconsider its previous decision not to introduce interest rate ceilings in the U.K.

You can sign the petition here http://petitions.pm.gov.uk/Payday-lending/

The petition closes on 27th March 2008.. Please e-mail your friends and ask them to sign up.

Does the world really need the Jordan Credit Card?

2008-02-24T10:41:00.004Z

From the Sunday Mirror

EXCLUSIVE After the jewellery, the lingerie and books.. it's the Jordan credit card
By Lara Gould Tv Editor 24/02/20

Glamour model Jordan aims to inflate her assets even further - by launching her own credit card.

The 29-year-old - real name Katie Price - is planning a "pink and girlie" card targeted at young women. A source said: "Katie sees this as the next step in developing the Jordan brand. She's lent her name to a string of other products and campaigns so why not move into the financial sector?"

But the idea has caused outrage among consumer groups, who fear the card could lure impressionable youngsters into debt. Jordan has already put her name to a lingerie range for Asda and a line of jewellery for Argos and has written a series of books, including her latest autobiography Pushed To The Limit. She also plans to bring out her own range of jewellery, clothing and cosmetics.

The mum of three, who recently spent more than £43,000 on her latest round of plastic surgery, has applied to have an official Jordan logo registered, featuring her naked silhouette.
She will be the first British star to front their own credit card - a trend kicked off in the US four years ago by rap music mogul Russell Simmons and tycoon Donald Trump - star of the American version of The Apprentice.

But Damon Gibbons, of Debt On Our Doorstep, said: "This is a totally irresponsible idea. Jordan is a very influential celebrity who has a lot of young fans who want to be just like her. Giving them a credit card endorsed by Jordan herself will encourage youngsters to spend cash on living a lifestyle they wouldn't normally be able to fund.

"Uk debt is currently up to around £1.3trillion. The last thing young people need is to be sold a glossy celebrity-backed credit card."

Jordan, who lives in a £3million farmhouse in East Sussex, has an estimated £30million fortune with pop singer husband Peter Andre.

Last night a spokeswoman for the model said: "This is something we are in talks with financial companies about doing in the next year.

"It will be the Katie Price credit card and it will be her own card rather than something Katie just puts her name to."

Northern Rock Nationalised

2008-02-19T06:20:00.004Z

The decision to nationalise Northern Rock represents the ultimate failure of the private sector to sort out its own problems arising from the credit crunch. Heavily reliant upon public investment in the entire banking sector (and increasingly upon the use of sovereign funds from overseas governments) the financial sector is no longer capable of raising funds to rescue those banks in the biggest trouble.

This is bad news. Not least because it also means that many other projects reliant upon raising large amounts of capital will also find it more difficult to proceed. Look around any UK city, and you will find a skyline of cranes putting up retail developments, swanky city living apartments, theatres and cinemas. But already many of these projects are in jeopardy. As last weekend's Guardian reported from Manchester, many of those city apartments have already come down sharply in value. There is every likelihood that new developments will stand empty for some considerable time as consumers lack the confidence to buy and mortgages are harder to find.

Equally, many commercial developments are likely to be stopped. The commercial property market started to squeal loudly in pain last month with many share prices tumbling. It's hard to see the financial sector wanting to invest in new developments for commercial property even if it had the ability to get it's hands on the levels of cash that this would require. But the reality is, cash and liquidity is now of vital importance to the banks themselves so less likely to be available for investment. That supply side crunch feeds through as both inflationary pressure (demand remains high) and as a threat to growth (by removing the funds for investment), which poses such problems for monetary policy in the UK.

So no surprise that the Northern Rock fiasco has resulted in nationalisation. But what next? Northern Rock has been actively repossessing customers in arrears in recent months. Will the Government want to take responsibility for evicting families from their homes, or will they now take an active role in leading mortgage lenders to adopt better ways of dealing with debt. Today's call by union leaders to preserve jobs at Northern Rock needs supporting, but further demands to review debt management, arrears and repossession policies also need to be urgently raised with new boss Ron Sandler.

Credit scoring: What is it good for?

2008-02-14T12:46:00.003Z

A recent German investigation into credit scoring systems has revealed that the cost of credit has little to do with objective assessments of customer risks and calls for greater transparency to be provided.

The research report, which is currently only available in German is available from the European Coalition for Responsible Credit website: www.responsible-credit.net

Debt on our Doorstep's proposals for action, issued in late 2007, already includes the following call:

"Credit pricing must be made more transparent. In particular, the industry should publish details of the factors taken into account when determining the interest rate offered to borrowers following a loan application, and the relative weighting that they have applied to these. Where the rate offered to a borrower is higher than the advertised rate, lenders should be under an obligation to state clearly why the applicant’s credit score was not adequate to support the offer of the lower rate."

The German report appears to provide further support for this proposal.

Bradford & Bingley Reveals Trouble Ahead

2008-02-14T09:13:00.007Z

Bradford and Bingley yesterday revealed a halving of profits as a result of failed investments in the U.S sub-prime housing market, and a surge in mortgage arrears with its UK borrowers to 40%. The declaration has caused some commentators to accuse B&B's management of a lack of 'credibility', and caused a meltdown in the value of B&B's shares (which lost a quarter of their value in a single day), and casts doubt on claims that the UK's lenders have been more responsible than their US counterparts.

The backdrop to the announcement from B&B is a combination of rising respossessions and falling property values, with the ratio of secured debt repayments to income at its highest level since the housing market crash in the early 1990's. In addition, the credit crunch is now starting to have an impact on businesses and employment. Although yesterday's figures revealed that unemployment continues to fall, business optimism is on the floor with an increasing number of employers forecasting that they will be laying workers off at some point in the next 12 months.

Despite these warning signs, the UK has not started to consider the types of support packages that will be required to protect consumers from the impact of a sharp downturn in the housing market.

In the US, steps have now been taken by lenders to restrict mortgage foreclosure actions and commitments given to take additional steps to help borrowers in difficulty as a means of preventing a flood of respossessed properties from further depressing house prices. As yet, no such discussion has been initiated by lenders in the UK. Neither has Government considered how it can improve assistance to borrowers that fall into arrears - for example by increasing the level of mortgage assistance available to the newly unemployed.

In the light of the Bradford and Bingley announcement, Debt on our Doorstep calls for a tri-partite forum involving lenders, Government, and consumer agencies to be convened as a matter of urgency to develop a package of support measures and improved protocols for dealing with consumers in arrears and to make recommendations to improve responsibility in lending.

Dood Workshop on Responsible Lending Proposals

2008-02-11T10:34:00.000Z

Damon Gibbons, Chair of Debt on our Doorstep, will be leading a workshop at the forthcoming Debt conference hosted by Kirkby Unemployed Centre, Merseyside on 28th February.

The workshop will focus on Dood's Responsible Credit 'proposals for action' which were launched in late 2007, and Gibbons will provide an update on Debt on our Doorstep and the European Coalition for Responsible Credit's perspectives for the current credit crisis.

Further details concerning the conference are available from Helen Jones at KUC, helen.jones@kuc.org.uk

Trisha's producers respond on Brighthouse sponsorship

2007-11-19T19:48:00.001Z

In response to messages left on Trisha's internet forums concerning the sponsorship of her show by Brighthouse (see previous post), the programme's production Company has made the following announcement:

"Some messages have been posted on our forum relating to the sponsor of the Trisha Goddard show on Five.Town House TV Productions makes the Trisha Goddard show but has nothing whatsoever to do with its sponsorship. Nor do we receive any financial gain from it. This is entirely a matter for the broadcaster, Five.If you wish you can contact them separately. You can raise your concerns by calling the customer services team on 0845 7 050505 or you can also email customerservices@five.tv "

Debt on our Doorstep urges supporters to contact Five as directed and to report replies. However, given the fact that there is no 'financial gain' for Trisha from the sponsorship deal with Brighthouse we have asked that she make a statement distancing herself from the company and that she devote a programme to predatory lending and the problems that this causes in the future.

We have posted the following question on the Trisha TV forum:

"...Trisha is quoted in a Five press release as saying that she was delighted by the sponsorship deal with Brighthouse. Is Trisha now retracting that comment?".

Does Trisha really think Brighthouse are a good deal?

2007-11-16T20:51:00.000Z

A reader informs us that Brighthouse are to sponsor the Trisha Goddard show on Channel 5 and that Trisha herself is reported as saying: “I am delighted we have teamed up with BrightHouse to sponsor my show. I relish the challenges involved in helping real people solve their problems in order to live better, more fulfilling, lives and it's great that BrightHouse share those aspirations.”

This, of course, is about a company that charges people on low incomes over £700 for a washing machine worth more like £300, and which ex-customers have prevoiusly reported uses aggressive, bully boy tactics to collect money from people in real financial difficulties.

Guy Hands, the multi-millionaire behind private equity firm Terra Firma Capital Partners which owns Brighthouse has already been featured in Debt on our Doorstep's newsletters in our Who's Who in Predatory Lending section. This is what a Dood supporter wrote about Brighthouse then:

"Me and my partner missed a payment near Christmas and when we went to pay up to date they said they needed a week in advance as well and refused to accept the payment. Since then we have taken the goods back which they never gave us any paperwork for and they are now saying they haven’t received these.

We weren’t given the choice about the ‘Optional Service Cover’ they said it was compulsory. We have been trying to sort out reduced instalments to pay our remaining items off as we have paid over three quarters of the total amount to them.

Today we got a knock on the door from two men in a white van saying they where from BrightHouse. One of them tried to climb the back fence and was only scared off because we have a dog. One man asked to come in. My partner and I refused entry so he called the other man to come over. They told me they needed an immediate payment of £5263.51. I told them I did not have the money but would willingly pay in instalments. He told me he would need to take the stuff from the property. I advised him he would need to get a court order. He told us that “we don’t know who we are messing with”. Eventually they left after sitting outside in the van for another half an hour. He also knocked so hard on the door we are having problems closing it since.”

On her website, http://www.trishatv.com/ Trisha has a forum for viewers to post comments. Tell her how you feel today.

Dood Calls on MEP's to protect UK consumers

2007-11-15T22:19:00.000Z

No Downgrading of Consumer Protection in the EU – Consumer and Social Organisations protest the Latest Move of the Parliament on the Consumer Credit Directive

The European Coalition for Responsible Credit (ECRC) and Debt on our Doorstep (DooD) today issued calls for MEP’s to stand up for UK consumers and to resist the latest proposals to water down protections contained in the EU Consumer Credit Directive.

The move comes in response to a new draft of the Directive being introduced into the European Parliament by the Rapporteur, Mr. Kurt Lechner of the Internal Market and Consumer Affairs Committee.

Commenting on the new proposal Professor Udo Refiner, Chair of the ECRC said:

“Consumer organisations from fifteen European states have been shocked in recent days to find that a significant weakening of consumer rights is being suggested in the European Parliament. There has been no consultation with national parliaments or with consumer representatives, on this new draft of the Directive, which appears to have been drafted with the assistance of the credit industry.”

Damon Gibbons, Chair of Dood called on UK MEP’s to take action in the Parliament to protect UK consumers.

“We are calling for MEP’s to intervene and reject the new draft. There has been no debate in the UK on these issues, yet consumers here stand to lose valuable protections. This all comes at a time when there is an obvious need for greater responsibility in lending. The last thing we need from Europe is a green light for lenders to con UK borrowers.”

Full text of the media release and details of the proposed amendments can be downloaded here

Cash Converters take fright as Queensland accepts the need for rate caps

2007-11-12T21:20:00.000Z

Payday lenders won't wear interest cap

From ABC Far North Queensland, 19th October 2007
By Derek Tipper

Payday lenders and financial counsellors disagree about the need for controls on interest charges on short-term loans, as the Queensland Government decides on the value of an interest rate cap.

Ever needed cash quickly and borrowed the money from a short-term lender? Whether you understand these transactions as payday loans or as the lenders prefer to call them, micro credit, chances are you paid back much more than the average $250 of the loan.

Each week borrowers need anywhere from $100 to $1000 to make ends meet. Spooked by stories of borrowers paying back $5000 on a $100 loan the Queensland Government is proposing to follow other states and cap the interest rate charged on these loans at 48 percent.

The move has the support of financial counsellors and consumer advocates like Indigenous Consumer Assistance Network general manager Aaron Davis. Mr Davis said many of his clients simply do not understand the concept of interest and are not capable of entering into a contract.

The industry is dead set against an interest cap. Rob Leggett, the Queensland President of the Financial Services Federation argues it would drive scrupulous operators out of the business of pay day lending because they simply couldn't make a profit. Mr Leggett said a cap was just bad business.

One of the biggest players in the industry, Cash Converters, is so concerned about a cap they have adopted a marginal seats campaign, lobbying 33 Queensland MPs whose electoral margins are smaller than the number of 11,000 signatures on a petition tabled in the Queensland Parliament opposing the proposed interest rate cap.

Cash Converters has also posted a video on You Tube purporting to depict customers supporting the need for payday lending, they also bought a full page ad in the Sunday Mail urging the government to reconsider.

Cash Converters General Manager Ian Day said a 48 percent cap would discriminate against low income earners and others who struggle to get credit. Mr Day said while scrupulous lenders oppose an interest cap they support regulation of the industry. But financial counsellors working with borrowers who get into trouble with these loans are not convinced.

David Tennant, chair of Australian Financial Counsellors and Credit Reform Association said claims by pay day lenders that a 48 percent interest cap makes their business unviable had not been borne out in the states, such as Victoria and New South Wales, where a cap already exists.
Mr Tennant said any lender that could not make a profit under a 48 percent interest rate cap should leave the industry.

ICAN'S Aaron Davis said there was an alternative to the current pay day lending products, with organisations offering interest free loans for the purchase of necessities. Queensland Attorney General Kerry Shine confirmed Queensland will have an interest rate cap but was not prepared to say what the interest rate would be.

Mortgage Repossessions Set to Soar - Guardian

2007-10-30T07:31:00.000Z

From Guardian Unlimited 29th October 2007

The number of repossessed homes looks set to soar next year to levels not seen since the 1990s house price crash, it was claimed today.

At the same time, house prices will edge ahead by just 1% in 2008 and property sales will fall by 15%, according to the Council of Mortgage Lenders (CML).

The group expects the number of repossessions to rise by 50% during the year, rising from 30,000 this year to 45,000 in 2008.It said this would be the highest level of repossessions seen since the 1990s, although it added the number of mortgages had increased by 1.5m since then, and the level of repossessions still represented just 0.38% of all home loans.

The number of people who are in arrears of at least three months is also set to increase, with 170,000 people expected to have problems keeping up with their mortgage repayments next year, compared with an estimated 145,000 this year.

The CML said this was because the five interest rate rises since summer 2006 were beginning to take their toll. This would be especially true for the 1.4 million people whose fixed rate deals, taken out when interest rates were much lower, run out next year.

But it added that additional pressure would be put on households as a result of a tightening in lending criteria sparked by the global credit crunch. It said remortgaging options available to some borrowers, such as those borrowing high income multiples, people with high loan-to-value ratios and those with adverse credit histories, would also reduce.

Crunch to intensify

The group said the credit crunch would exacerbate trends already emerging in the market. It predicts house price growth will fall from 7% this year to just 1% next year, while property sales will drop from 1.17m to just over 1m. At the same time, total mortgage advances will edge lower to £340bn, compared with £360bn this year, although the amount lent will remain above 2005 levels.

Net lending, which strips out redemptions and repayments, will also decrease, seeing a drop to £90bn from £105bn. But the CML added that it did expect interest rates to fall, and has pencilled in a 0.25% cut before the end of this year, with rates reducing by a further 0.5% to 5% by the end of next year.

CML director general, Michael Coogan, said: "The housing and mortgage markets are facing their most challenging period since Labour came to power a decade ago.

"Luckily, the credit crunch occurred at a time when the UK economy was robust, but even so the effects on the financial sector are significant, and the mortgage market is not immune from them.

"We now expect a slower mortgage market next year, although by no means a stagnant one," he added.

The group said the impact of the credit crunch made forecasting an even more uncertain process than usual, and as a result it was only issuing forecasts until the end of 2008, and would not issue its predictions for 2009 until the first quarter of next year.

Responsible Lending: Proposals for Action

2007-10-24T13:22:00.000Z

Debt Campaigners Declare October 23rd ‘Responsible Lending Day’ and call on Government to raise its game to tackle UK Debt Crisis.

Debt on our Doorstep, the campaign for fair and responsible financial services, has declared October 23rd to be the UK’s ‘Responsible Lending Day’ and called on Government to raise its game to tackle irresponsible lending and Britain’s growing debt problem.

The day will see the Westminster launch of Debt on our Doorstep’s 17 page report into debt in the UK which sets out proposals for action in 8 areas including calls for:

Banks to disclose how they serve low income communities and meet the need for affordable credit

Regulation of the credit card industry to be tightened to ensure they take proper account of a borrower’s ability to repay and for a ban on unsolicited increases in credit limits and credit card cheques

Longer term funding for projects to tackle illegal money lending and for the introduction of a criminal offence of usury.

Lenders to also advertise APRs of agreements with payment protection insurance included so that borrowers can see the true cost involved

Calling on Government to draw up a properly resourced national strategy for debt advice provision

Launching the report, Damon Gibbons, Chair of Debt on our Doorstep, commented:

“The Government has so far underplayed the role of irresponsible lending in causing debt, and continues to allow the industry to target high cost credit at people on low incomes as a means of increasing profit.

We are now seeking some fundamental changes to the UK’s credit society – asking banks and mainstream lenders to prove that they are engaging with low income communities and can offer them the products they need. If the Government is willing to pump money into the financial services sector to offset the impact of the ‘credit crunch’ then it must start to seek better services for people in return.”

The launch takes place at 5pm in Committee Room 5 of the main building of the Houses of Parliament with the following speakers:

Prof Iain Ramsay, University of Kent Law School (Chair)
Damon Gibbons, Debt on our Doorstep
Mark Lazarowicz MP (Lab) & Chair, All Party Parliamentary Group on Debt
Ed Vaizey MP (Conservative)
Adam Price MP (Plaid Cymru)
Danny Alexander MP (Lib Dem)
Anne Pettifor, Advocacy International and author of 'The Coming First World Debt Crisis'

The first Responsible Lending Day also features a British Bankers Association conference in London on these issues, but which is taking place at a cost of £400 per head and has minimal involvement from consumer groups.

A full copy of the proposals for action are available from: http://www.debt-on-our-doorstep.com/files/responsible%20credit%20proposals%20for%20action.pdf

One million householders use credit cards to pay mortgages or rent

2007-10-17T15:42:00.000Z

More than a million householders have used credit cards to pay their mortgage or rent in the past 12 months, according to a new survey published today by Shelter in its magazine ROOF.

In a desperate attempt to stay on the housing ladder a growing number of young people, including first-time buyers, are turning to credit cards, with almost seven and a half per cent of people aged 18 and 24 saying they had done so in the last 12 months.

The survey, conducted by YouGov for ROOF magazine, polled two thousand households following the Northern Rock crisis. Six percent of respondents who pay mortgages or rent said they had relied on a credit card to make payments, equating to a national figure of more than a million householders.

Shelter chief executive Adam Sampson described the results as shocking, and added: “The number of people hit by the credit crunch, interest rate hikes and unaffordable housing costs are rapidly rising.

“For many people trying to keep a roof over their head desperation is driving them to short-term, high-cost borrowing. Ordinary people are being forced to seek more risky and expensive ways to stave off the threat of eviction and repossession.”

Most credit card companies charge interest at between 15 and 18 per cent – nearly 50 per cent above even the highest mortgage interest rates of 11 or 12 per cent in the sub prime sector.

But for people with poor credit ratings the card companies can charge interest rates of up to 40 per cent, a staggering five times above the average mortgage rate.

Stuart Freeman, director of services at Community Housing Advice Service, which offers advice on housing and debt, said: “There is such pressure on people’s budgets that paying your mortgage or rent by credit card, then paying that card with another card is becoming the norm for many people.

“It leads to an ever spiralling maze of debt, and eventually the credit simply runs out.”

The poll also found the practice more prevalent in men than women with seven per cent of men admitting to using credit cards compared to six per cent of women.

The situation is worst in the Midlands and Wales with nine per cent – almost one in ten – households in the region using credit cards to keep a roof over their head. Northern England and London were closer to the national average at six per cent whilst Scotland polled at just three per cent.

Part of the problem stems from irresponsible mortgage lending allowing people to overstretch themselves financially, forcing them to use credit cards to stay afloat. However Heather Keates, Director of Community Money Advice, said lenders shouldn’t shoulder all the blame.

“If someone is making minimum payments on their credit card and they have four or five cards, when they are credit checked they don’t look like a bad risk because companies don’t have the whole picture.

She added: “It’s fine if you pay off the balance every month, but I would suggest that the majority of people don’t – they just pay off the minimum, so the debt starts to spiral.”

Shelter’s Adam Sampson continued: “Clearly this is a huge problem which will only become more widespread as housing costs continue to rise.

“We would urge anyone struggling with the cost of their mortgage or rent to seek independent financial advice or log onto www.shelter.org.uk urgently before resorting to such desperate, and ultimately more expensive, measures.”

In the ROOF magazine article, Damon Gibbons, Chair of Debt on our Doorstep comments:

"One in ten is a phenomenal figure and shows that people are significantly overcommitted. It shows they are concerned that they could face repossession action for not paying their housing costs and are keen to try and maintain those payments if at all possible."

He called for a national strategy for debt advice services to ensure access to assistance for those in financial difficulties:

"What is clear is that better advice is needed to help people rearrange their finances and pay less on unsecured credit before this problem escalates. We don’t have a national strategy for debt advice provision and somebody has got to address this issue fast."

Westminster Launch of Responsible Credit Proposals

2007-10-01T13:40:00.000Z

Invitation to the Westminster Launch of Our 'Responsible Lending' Proposals & AGM, Tuesday 23 October, London

Irresponsible lending in the US sub-prime mortgage market has now fed through into a 'credit crunch' for UK banks, causing upward pressure on mortgage and lending rates for all consumers. With increasing evidence of irresponsible lending practices in the UK, there has never been a better time to lobby for improved regulation of the financial services industry.

Following the success of our own responsible credit conference in Edinburgh in May, we will be launching a new set of proposals for action to MP's to address irresponsible lending practices at the Houses of Parliament on Tuesday 23 October (time tbc). A number of MP's from across the political spectrum, as well as agencies involved in our campaign will be speaking at the event.

The launch will be immediately preceded by a Campaign Forum and Annual General Meeting, 3 - 4:30pm at the Abbey Centre (behind Westminster Abbey at 34 Great Smith Street, London SW1P 3BU )

Please let us know if you are able to participate by emailing, faxing or posting back the form below.

[ ] I plan to attend the Campaign Forum and AGM on 23 October. Please send me a map and agenda.
[ ] I want to attend the "Responsible Lending" Parliamentary launch. Please send me more details.
[ ] I am unable to attend. Please note my apologies.

Name .........................
Organisation .........................
Email .........................
Address .........................
......................... Postcode ......
Please return to: Debt on our Doorstep, c/o CAP, Central Buildings, Oldham Street, Manchester M1 1JT, OR fax 0161 2375359 OR e-mail to info@debt-on-our-doorstep.com
________________________________________

Irresponsible Lending Hits Home - Northern Rock is only the start

2007-09-18T07:44:00.001Z

Irresponsible Lending Hits Home: Why Northern Rock is only the start

Debt on our Doorstep and the European Coalition for Responsible Credit today issued a stark warning that the Northern Rock crisis, considered by many commentators an after shock of the US sub-prime lending disaster, is in fact a precursor of wider problems that will be witnessed in the UK over the next 12 months.

In a joint statement, Damon Gibbons, Chair of the Debt on our Doorstep campaign, and Professor Udo Reifner, Chair of the European Coalition for Responsible Credit urge the UK government to place new obligations on British banks to both act responsibly and ensure access to credit for low income households. They argue that assistance to the banking industry at this time should not be given on a no-strings basis and that an urgent review of the role of bank policies that exclude the poor should now be undertaken with a view to removing the market segregation that gives rise to sub-prime lending and has led to the current crisis

"This crisis has been caused by irresponsible lending practices in the U.S, and we know from the FSA's work in recent months that UK sub-prime lenders have also been irresponsible. As mortgage costs rise in the UK, low income consumers will face the same problems as their American counterparts, and this will magnify the impact of the credit crunch in the UK. Ultimately, lenders will become more restrictive in their lending; on the face of it a good thing, but in reality it will drive low income households into further difficulties and leave them in the hands of predatory and extortionate lenders.

We call on the Government to place greater duties on mainstream lenders to meet the credit needs of low income communities; for them to be obliged to act with responsibility and to provide access. The current segregation in the credit market must be abolished as this has directly given rise to the current crisis. Only with those obligations in place, can central bank and government assistance to the banking industry be justified. What we need now is banking for, and not against, the people."

Full statement follows:

The cause of the current crisis : US lender irresponsibility and greed

The causes of the credit crunch affecting Northern Rock clearly lie in the irresponsible lending practices of US sub-prime lenders. Mortgages have been provided to low income households in a variety of predatory and extortionate ways on the assumption that house price rises would protect the lender from the risks of default. However, not content with providing honest products that would enable poor people to access home ownership, the lenders constructed products that allowed them to be exploited (for example adjustable rate mortgages, and mis-sold 'liar loans' that did not require brokers to check applicants income details). At the heart of the problem was a 'get rich quick' mentality of US sub-prime lenders and a lack of ethics or responsibility to the borrower in the long term. With the downturn in the U.S economy these excessive risks have now come home to roost. Mortgage foreclosures in the US are at a record high, and the human cost is impacting at a political level with the US Government forced into intervening to protect genuine borrowers from bankruptcy.

Global financial services transmit risks from the US to Europe

The risks taken on by US sub-prime lenders have now been transmitted to mainstream credit markets in Europe through a variety of weird and wonderful methods of debt securitisation that were bought into by banks across the globe. In the same way that US sub-prime lenders did not care about the financial position of their applicants, the UK and European banks paid no attention to the true value of these financial instruments. As a result, no lender in the UK and Europe truly knows their own exposure^{^[1]}. Not knowing the level of exposure to these 'junk bonds' affects even those banks that have large levels of deposits. Even they are now unwilling to lend out cash without demanding a much higher price than previously - leading to rate rises that will ultimately cause problems for all households with mortgages or outstanding credit. The central banks have a choice of intervening with cash handouts for financial institutions that are worse hit; effectively subsidising the irresponsible with tax payer's money; or sitting back whilst more households struggle to cope with increased mortgage costs.

The Credit Crunch

Meanwhile the credit crunch affects more than those that are exposed to sub-prime risks. Northern Rock does not have much direct exposure. But, as a relatively small holder of deposits, its business model requires it to have access to large amounts of credit to fund further lending. In recent statements, Northern Rock states that they had recently scaled back their lending. That may be true in comparison to the past few years during which the company sought to grow at exponential levels.

But Northern Rock was also guilty of underestimating the likelihood of interest rate increases and had sold large numbers of mortgages on cheap fixed rate loans in order to attract a major market share. It had borrowed its own money on short term, variable, rates but lent on a longer, fixed term basis. As a result, many of its borrowers are now paying back at lower rates than it must itself pay back its own creditors. To address this, Northern Rock had to raise finance to lend further. When it could not afford to obtain this at market rates it went to the central bank for help. For this reason, despite central bank assurances, the so-called naive and 'herd' behaviour of depositors seeking to take out their savings from Northern Rock is, in fact, rational behaviour. The company is not viable in today's changed market place, and that is reason enough for depositors (acting as small investors) to decide to switch their money elsewhere.

Those UK bankers that have been at the forefront of applauding the free movement of capital around the globe and have consistently advocated for the liberalisation of capital controls with little sympathy for the countries they deprive of investment, now find that they are victim to the same effects as their depositors remove their investments on en masse all over the country.

What Next in the UK?

The UK's own sub-prime housing market has been booming in recent years^{^[2]}. As mainstream banks withdrew credit from low income households, and as house prices increased, the sub-prime lenders moved in. Regulation of this sector of the market has historically been weak. In 2005, the FSA warned that 60% of sub-prime mortgage loans were sold without proper knowledge of the applicants financial circumstances. In addition, they reported concerns about the suitability of sub-prime mortgages being sold as a means of debt consolidation:

"...in 80% of cases, there was lack of evidence to show how the recommended sub-prime product met the customer's needs and circumstances; and in 67% of those cases which involved debt consolidation, firms could not demonstrate that they had taken account of the additional requirements related to debt consolidation mortgages and thus it was unclear whether the recommendation was appropriate" (FSA press release, September 2005)

Despite having issued good practice guidance to mortgage lenders and brokers, the FSA found on conclusion of a further investigation in July 2007 that:

"None of the lenders adequately covered all relevant responsible lending considerations in their policies. For example, some firms' lending policies contained unclear affordability or self-certification requirements...In many cases, lenders did not apply their own policies in practice. For example, some firms failed to check the plausibility of information, as required by their own lending policy...There were also failings by lenders to monitor the application of their policies, which resulted in the approval of potentially unaffordable mortgages."

These regulatory failings, coupled with rising mortgage rates and an increased overall debt burden amongst UK low income households is starting to lead to increased defaults and repossessions. Only last month, the Council of Mortgage Lenders in the UK revised their repossession figures to take account of the increased activity of sub-prime lenders in this respect.

The problems that we are witnessing in relation to the current US sub-prime market problems will be repeated in the UK, causing the credit crunch to become further entrenched. The initial response of lenders will be for them to transform themselves into the advocates of responsible lending - repeating the so-called 'flight to quality' that caused the mainstream markets to desert low income communities in the late 1980's and 1990's, and which created the conditions for the rise of sub-prime lending. As the credit crunch impacts on both the housing and consumer credit markets, more and more people will become excluded from mainstream credit. Predatory Home Credit and Payday lenders must be rubbing their hands at such a prospect.

Why we need banking for the people

In the final analysis this process will result in a further entrenchment of the current segregated credit market - with larger numbers of people cast outside mainstream financial services being charged increased prices.

As genuine consumer advocates of access to responsible financial services, we urge the UK Government to think for the longer term and to introduce measures to expand credit through mainstream financial services to people on low incomes. We ask for them to end the current dual market for credit that has given rise to this current crisis. An injection of capital to financial institutions now must be coupled with requirements to meet the needs of the whole population for financial services at fair prices with strengthened regulation. We call for financial services to meet their obligations - to provide both access to credit and to exercise ethics in the provision of that credit. Now, more than ever before, we need banking for the people.

^{^[1]} A fact reinforced by the September market summary from the Council of Mortgage Lenders (see their website).

^{^[2]} Datamonitor report that the UK sub-prime market has been growing since 2004 and that gross lending increased by 28% in 2006 alone with exposed lenders including DB Mortgages (Deutsche Bank), Abbey, Alliance & Leicester.

Pressure Grows for Rate Cap in Queensland

2007-08-12T13:48:00.000Z

The following is an article from the Courier & Mail, Queensland, Australia - 3/08/2007

Mum's 240% interest scare

KAREN Deakin doesn't want to see another payday lender again. A loan bearing 240 per cent interest rates tends to do that.

Like many who sign up for short-term credit, the Brisbane pensioner did not read the fine print of her contract saying what the true interest rate was.
The lender was too busy telling her about the small weekly repayments.

"It's just terribly wrong," Ms Deakin, 41, of Loganlea, said yesterday.

"There should be something done to stop people like this taking advantage of people who are desperate."

In October 2005, she borrowed $1500 from a Beenleigh lender on Brisbane's southside to help pay a few bills. The contract – completely legal – was for one year with a weekly repayment of $80, amounting to about $4300 by the end of the term.

Had Ms Deakin borrowed the same amount on a standard credit card rate of 15 per cent, she would have paid $80 a week for five months, paying about $100 interest.

When the contract and repayments expired last October, however, the lender kept taking the repayments out of her account every week.

Ms Deakin only noticed this last month when she received a receipt for the extra $3000 she had paid.

Ms Deakin may not have found herself in the predicament she is now in if Queensland's Fair Trading Minister Margaret Keech had kept her promise to protect Queenslanders from exorbitant payday lending interest rates.

In some cases, it had been reported, that rates of more than 1600 per cent were being demanded.

In an admission which has infuriated consumer groups, Mrs Keech yesterday admitted her self-imposed mid-year deadline to cap exorbitant rates had not been met.

The missed deadline comes after nine years of Government inaction and broken promises.

Queensland lenders can still charge consumers whatever they want, despite other states introducing rate caps of about 48 per cent in 2001.

Mrs Keech said the legislation hadn't gone to Cabinet because

finalising the consultation process took longer than her department had anticipated.

"I expect to finalise the Government's response to this issue, including proposed legislation, in 2007," she said.

Consumer groups such as Legal Aid Queensland are furious after falsely believing help was finally on the way.

The group recently settled a court case against a lender charging 1642 per cent annually.

The loan was ostensibly at 9 per cent, but had to be repaid in 48 hours, making the annual rate astronomical.

"We're still waiting," LAQ chief executive Jenny Hardy said.

"In the meantime, our clients are still hurting as they struggle to pay off their debts."

The Courier-Mail revealed last year a list of promises from ministers to review and cap rates dating back to July 1998.

Opposition fair trading spokesman Mark McArdle yesterday called on the Premier to intervene.

"Empty promises from empty vessels," Mr McArdle said.

"If the minister can't even commit herself to a deadline and make it happen, then the Premier has got a real problem and should be doing something."

Mrs Keech indicated she intended to introduce a cap – expected to be similar to 48 per cent – to limit the cost to consumers.

However, such a move would be one lenders such as National Finance Services Federation Queensland president Rob Legat claim will devastate the industry.

Mr Legat said it was wrong to ask a business to fix its income, which would effectively happen under cap legislation.

Use Unclaimed Money to Tackle Rip Off Lenders

2007-08-10T15:31:00.001Z

Money from dormant bank accounts should be used to fund affordable credit and banking services for the worst off, the National Housing Federation has recommended.

The Federation says the scheme would create a viable alternative to rip off doorstep lenders, which target those households most in need of small scale credit, particularly social housing tenants. With sky-high interest rates, borrowers can quickly be sucked into spiralling debt.

In its submission to the Treasury’s Commission on Unclaimed Assets, the Federation has identified a way of making cheap loans and a range of other financial services available to low income families nationwide.

Money that has been left untouched in bank accounts for 15 years would be used as capital to boost existing non-profit lenders, such as credit unions and community development finance institutions (CDFIs), and extend their services throughout the country.

Credit unions and CDFIs currently offer affordable loans, savings schemes and cheap white goods to people on low incomes, but provision is patchy and their availability is a postcode lottery.

Under the Federation’s proposals, these lenders would be developed into a powerful network of financial service providers working in every region, or even a single national agency.

Housing associations would also contribute resources to the new facility, and would use it to offer loans, savings schemes and financial advice to their tenants. Around 60% of social housing tenants are financially excluded.

A high street bank would also work in partnership with the scheme to provide a fully accessible basic bank account to customers, as well as back office and IT facilities to the new service.

The proposal is based on research for the Federation by the specialist consultant Niall Alexander, which is published alongside the Unclaimed Assets submission today.

David Orr, chief executive of the National Housing Federation, said: “Doorstep lenders target social housing tenants with sky-high charges. It’s time to offer a viable alternative.

“We are calling on a number of parties, including housing associations, the Commission on Unclaimed Assets, non-profit lenders and high street banks, to work together to tackle exclusion.

"If our proposals are implemented we can make a real difference to the lives of social housing tenants throughout the country.”

Bank Charges Campaign Gets Big in Japan

2007-08-02T16:45:00.000Z

Today's FT reports that a landmark Japanese Supreme Court Ruling has left consumer credit lenders vulnerable to borrowers seeking to reclaim money by claiming that they have been overcharged in similar ways to the UK consumers over bank and credit card default charges.

This in a week when HSBC reported it has already paid out over £116 million to UK consumers; HBOS £79 million; and Lloyds £36 million. With the movement now going international, it now looks as if these sums will be tip of the iceberg.

India - Lack of access to bank credit cause of moneylending problems

2007-08-02T16:33:00.001Z

The Reserve Bank of India has moved to limit the reliance of the rural poor on high cost moneylenders which arises because only 19% of the population are able to get access to mainstream bank finance.

In proposals issued this month, the Reserve Bank is supporting calls for all moneylenders to be registered with local states and for those states to introduce interest rate caps. Rate caps will not apply to the microfinance agencies in India which have argued against caps for some time on the basis that this will provide a
disincentive to market entry.

The proposal for interest rate caps for moneylenders will allow individual states to set their own cap provided that these are calculated by assessing the cost of funds and the cost involved in deploying those funds.

Washington Post comes out in favour of caps on payday loans

2007-08-02T16:23:00.000Z

Yesterday's editorial in the Washington Post came out in favour of a 24% interest rate cap on payday loans in the state, and neatly summarised the issues relating to caps generally. Moves are currently afoot to introduce caps in 12 U.S states and the UK consumer may be wondering why it is that US payday lenders such as Dollar Financial (trading under the Moneyshop brand in the UK) continue to operate here with no limits on interest rates and fees...

The full article follows:

Salary Sinkhole
The District would be right to impose limits on payday lending.
Wednesday, August 1, 2007; Page A16

CHANCES ARE, everyone at some point has been short of cash. Most people, though, wouldn't even consider a loan if the interest totaled nearly 400 percent a year. That those who are least able to afford such exorbitant rates are being victimized by them is reason enough for the D.C. Council to follow through on plans to crack down on payday lending.

Before adjourning for the summer, the council gave tentative approval to a measure restricting the rate of interest on payday loans. Typically located in low-income neighborhoods, payday lenders offer short-term loans (generally two weeks) of several hundred dollars. All a borrower needs is a post-dated personal check and a pay stub verifying employment.

The current rate is about $16 to borrow $100 for two weeks, or an annual percentage rate of nearly 400 percent. Under the bill sponsored by council member Mary M. Cheh (D-Ward 3), payday lenders would lose their exemption from the 24 percent interest-rate cap that applies to lending in D.C. The industry is expected to pull out all the stops to block final passage, arguing that the service is needed because people without established credit have no other options. In fact, the business is rooted in the inability of borrowers to repay their loans in full and on time. People take out new loans to pay off old ones; the nonprofit Center for Responsible Lending estimates that a typical borrower (in the District that person is a single mother with little means) ends up paying back $793 for a $325 loan.

It is instructive that Congress, appalled by stories of soldiers and their families hobbled by debt, voted last year to put in place a 36 percent cap on payday loans for military personnel. At present, some 12 states, including Maryland, have moved against payday lending. One reason the industry is so alarmed by the prospect of the D.C. regulations is that they could have a ripple effect: Virginia came close to imposing restrictions this year. No doubt capping interest rates will cause some firms to stop doing business. But the experience of states such as North Carolina has shown that there is no adverse impact on consumers and that more responsible forms of lending fill the gap.

Test Case on unauthorised overdraft charges

2007-07-26T18:13:00.001Z

The following is a press release issued today by the Financial Services Ombudsman

ombudsman agrees that High Court "test case" is necessary - to settle legal uncertainty on unauthorised overdraft charges

26 July 2007

In light of the agreement announced today between the Office of Fair Trading (OFT) and a number of representative banks - to take a "test case" to the High Court about unauthorised overdraft charges - the ombudsman service has confirmed it will put on hold its own work on complaints about these charges, pending the outcome of the legal proceedings.

The law is one of the issues that the ombudsman has to take into account when making decisions on individual cases - and this important "test case" involving OFT and the banks is expected to give vital clarity on the key issues of law involved in disputes about unauthorised overdraft charges.

Responding to the news about the proposed High Court "test case", Tony Boorman, principal ombudsman, said today:

"This year the ombudsman service has been dealing with tens of thousands of enquiries and complaints about bank charges - and county courts across the UK have similarly been coping with significant volumes of bank-charge claims."

"In the cases that the ombudsman service has settled so far, all disputed unauthorised overdraft charges have been repaid - but on a voluntary "goodwill" basis, without the ombudsman reaching the stage of investigating the merits of the legal issues. Meanwhile, cases heard in the county courts have so far resulted in a range of outcomes - with inconsistent and unpredictable judgments and no clear legal precedent being set."

"So it's in the interests of everyone involved - consumers with current accounts, the courts, the banks and other current-account providers - that the High Court "test case" announced today should settle the legal uncertainties relating to the level, fairness and lawfulness of unauthorised overdraft charges."

"We agree that it's also in the general interest for the ombudsman service to suspend its own work on complaints about unauthorised overdraft charges, while waiting for the High Court to make a decision on the significant legal issues involved."

It is expected that the decision by the ombudsman service to suspend further work on complaints about unauthorised overdraft charges will be reflected by a similar response by the county courts. For the county courts and the ombudsman service, the High Court "test case" should mean that very significant volumes of cases can be managed in a fair, cost-effective and orderly way. The ombudsman service's decision to put complaints on hold - while the key legal questions are answered - does not affect consumers' ability to bring complaints to the ombudsman about other banking-related problems, including financial difficulty or hardship.

To help with the fair and orderly management of consumer complaints about unauthorised overdraft charges, the Financial Services Authority (FSA) has announced today that banks and other current-account providers can also put cases on hold, pending the "test case" decision. Once the law has been clarified, it should then be possible for these cases to be settled in line with what the High Court decides.

There is more information about how today's "test case" announcement affects complaints to the ombudsman service in the ombudsman's consumer factsheet on unauthorised overdraft charges:

http://www.financial-ombudsman.org.uk/faq/bank-charges.html

Consultation on Credit Licensing 'Fitness' Conditions

2007-06-27T10:40:00.000Z

The delayed consultation on the 'fitness' conditions for consumer credit licensees has today been issued by the OFT with a deadline for responses of 21st September 2007.

The consultation, which has been brought about as a result of changes to the licensing provisions contained in the Consumer Credit Act 2006, seeks to incorporate the concept of 'responsible lending' into the licensing framework for all consumer credit lenders. Although the consultation document references this fact, and provides some limited insight into the meaning of 'responsible lending' it goes onto promise that further guidance on this issue will be provided at a later stage - although no date is set for this, and it is unclear as to whether there will be a separate consultation on the matter.

The sections in the current consultation document on 'responsible lending' (paras 2.24 - 2.26 of the document) include the following:

"We consider irresponsible lending to include failing to make a proper and diligent assessment of the potential borrower's ability to repay a loan in full and to make all the periodic payments as they fall due.

The OFT would consider it irresponsible for lenders and intermediaries not to take reasonable care in making loans or advancing lines of credit in revolving credit card agreements. Reasonable care would include taking steps to find out and check the borrower's creditworthiness, and ability repay the debt and to meet the full terms of the agreement. For example, we would not consider offering new lines of credit to borrowers who are exhibiting typical signs of inability to repay existing debts (such as missed payments or always making only minimum repayments on a credit card account) to be responsible lending.

The OFT plans to produce guidance for the credit market to identify practices that we consider may be irresponsible lending. "

Debt on our Doorstep has today written to the OFT requesting clarification as to whether or not there will be a separate consultation on the concept of 'responsible lending' as a result.

We will be providing members with an opportunity to feed into the Debt on our Doorstep response to the consultation over the coming two months.

OFT Moves on Credit Card Pricing

2007-06-27T10:36:00.001Z

The OFT has today announced a new programme of work with the credit card industry and consumer bodies to make the cost of credit cards easier for consumers to understand. This decision follows a super-complaint from Which? that highlighted that consumers are choosing credit cards without understanding all the issues that affect the cost of the card.

OFT research shows that the majority of card holders do not compare cards at all. This new work will explore the issues surrounding the cost of credit for credit cards including purchases, cash advances, introductory offers and payment allocation. This work is expected to take six months, and will involve close work with the credit card industry, consumer groups, other regulators, government bodies and other key stakeholders.

John Fingleton, OFT Chief Executive, said:'Credit card pricing has become increasingly complex, with many new dimensions such as interest free periods. While these new pricing dimensions give additional choice and value to consumers, they can make it harder for consumers to make informed decisions. This work will consider how pricing information might be improved so as to enable better product comparison by consumers, without stifling valuable competition and innovation that benefits consumers.'

Debt on our Doorstep has previously drawn attention to poor levels of transparency in the advertising of sub-prime credit cards, where initial 'concessionary' rates are advertised, only to be replaced by significantly higher rates in the event of a default.

South Africa: New Responsible Lending Law

2007-06-04T20:14:00.000Z

South Africa: New Law attempts to balance responsible lending and borrowing

Article from Independent Online - South Africa 1st June 2007

The exploitation of consumers by unscrupulous money-lenders that have led many poor people into debt traps will become a criminal offence under the new National Credit Act, which comes into effect on June 1.

However, consumers have been warned by the National Credit Regulator and banks that dishonest disclosure of income and expenses could result in some of their new-found protection being forfeited under the new Act.

The National Credit Act 34 of 2005 replaces the Usury Act, the Integration of Usury Laws Act 1996 and the Credit Agreements Act 1980, which have regulated the granting of credit since 1968. The Act will make it difficult for credit grantors to give loans to over-indebted consumers.

Gabriel Davel, CEO of the National Credit Regulator, which has legislative powers under the Act similar to the Financial Services Board, said the legislation would, for the first time in history, regulate information held by credit bureaus and provide protection for consumers entering into credit agreements.

Consumers who lied would forfeit some of the protection
"The new Act is a consumer protection piece of legislation. It is there to ensure that consumers are treated fairly in credit contracts," Davel said.

Davel said that credit card debt had grown by 128 percent during the past two years and that the latest statistics obtained by his office showed household debt had risen to R750-billion.

Credit grantors, including banks, retailers, micro-lenders and pawnbrokers who have 100 or more loan agreements or loans of R500 000 or more on their books will be required by the Act to register with the regulator. About 4 200 credit grantors have registered.

Davel said the National Credit Register, which would list consumer debt and act as a database for credit grantors, would be ready in January 2008. Credit grantors must check credit bureaus and the register before granting credit, to ensure repayment affordability.

However, he warned that consumers who lied about existing debts when opening new accounts would forfeit some of the protection afforded by the legislation.

The Act makes provision for debt counsellors to assist over-indebted consumers who fall into the debt trap.

Credit Information Ombudsman Manie van Schalkwyk said consumers could approach debt counsellors and if it was found that the consumer was over-indebted credit grantors would not easily be able to obtain a judgement.

"The debt counsellor can make a recommendation to the court that there has been reckless lending, and if the credit grantor is found guilty the agreement could be suspended and a fine of up to R1 million can be imposed," Van Schalkwyk said.

Consumers who "go into counselling" will be prohibited from obtaining further loans until the debt is repaid.

Louis Malherbe, Nedbank's home loans business analyst for the new Act, cautioned consumers to be truthful about all their debts when applying for credit.

"A mortgage originator will ask what your expenses are, including all your retail accounts, and it is vital that the consumer tells us upfront, otherwise the reckless lending provision falls away," Malherbe said.

Under the new Act it will be illegal for credit grantors to issue credit cards to consumers who have not applied for them. Costs that have been standard practice for banks, such as early settlement or administration fees, will also be illegal.

Louis von Zeuner, Group Executive Director of the Absa Group, said bank staff had been working overtime to implement new computer systems in order to comply with the Act. This had cost the bank R100-million.

"Nedbank fully supports the Act, and a huge amount of work has gone into ensuring that we grant credit in a manner that upholds the principles of the National Credit Act," said Wessels.

UK Credit Options Conference Success

2007-06-01T14:29:00.000Z

The UK credit options conference organised by Debt on our Doorstep and Citizens Advice Scotland earlier this week was a huge success with over 100 delegates on each of the two days debating the need for further work to ensure access to responsible financial services.

The conference, which featured the first public engagement of the new Scottish Executive's Minister for Communities and Sport, Stewart Maxwell, and which brought together local authorities, debt advice agenices, citizens advice bureaux, academics, banks, lenders, and politicians and policy-makers attracted considerable media attention. A full report of the conference, including a media report will now be pulled together in advance of the European Coalition for Responsible Credit conference in Brussels in September (see www.responsible-credit.net for further details).

Discussions at the conference for further action included the development of a sustainable Debt on our Doorstep network in Scotland, of which we hope to bring you more details in the next few weeks, and also preliminary but exciting talks to hold similar events in Belfast and Cardiff.

In the meantime, below is a list of media that featured the conference, demonstrating the impact of events like this not only on taking forwards the debate amongst practitioners, the industry, and policy-makers, but also how they help to raise public awareness of the problems facing UK consumers.

Newspapers
Herald / Society
Press & Journal (mentioned over 2 days)
Glasgow Evening Times
Sunday Mail

Sunday Mirror

Television
BBC Scotland
ITV / GMTV

Radio
BBC / Good Morning Scotland
Central FM
Forth FM
Clyde FM
Tay FM
Northsound
Moray Firth Radio
Talk 107

West Sound

Websites
Parliament Today
Third Force News (main magazine of Scottish voluntary sector)

Community Care Magazine

Debt & Financial Inclusion in Leicester - 6th June

2007-06-01T11:14:00.001Z

Leicester Money Advice Ltd, and the East Midlands Money Advice Partnership are holding a one day conference on debt and financial inclusion at Leicester City F.C on Wednesday 6th June.

The event will hear from speakers including Joanna Elson, Chief Executive of the Money Advice Trust and Mark Lyonette, ABCUL and a member of the Financial Inclusion Task Force. The conference will raise awareness of debt issues across the city and county and aims to develop an integrated partnership approach to tackle debt and financial inclusion problems.

To register for the event, which is free, contact Richard Rippin on 0116 242 1150 or by e-mail at richard.rippin@leicestermoneyadvice.org.uk

Dood Reveals 'Debt Tax' on Poorest Households

2007-05-27T06:26:00.000Z

Debt on our Doorstep today released an analysis of household debt in the UK showing that one third of the U.K’s poorest households are paying over 11% of their annual incomes servicing unsecured credit debts.

The move comes prior to the start of the ‘UK Credit Options’ Conference, organised by Citizens Advice Scotland and Debt on our Doorstep for 28 /29th May 2007, which will bring together over 100 delegates per day to discuss the need for responsibility in lending.

Our analysis shows that whilst poorer households are less likely to get access credit (37%) than their richer counterparts (60%) – they take on a greater level of debt relative to their income. This translates into higher debt repayments as a % of their income for poorer households, making debt act as a form of taxtion on the poor.

Damon Gibbons, Chair of Debt on our Doorstep, commented:

“Repaying a growing debt burden reduces the disposable incomes of the poorest households more than it does those of their richer counterparts. For the poorest 20% of households with debts, the growth in debt repayments will completely offset any growth in their income as a result of tax and benefit changes that have been made in the past 6 years and pull households back under the Government’s poverty line.”

“Because debt is not spread evenly across households, it acts like a form of regressive taxation, magnifying existing inequalities in the income distribution. Further investigation by the Government is urgently required. To date, none of their official reports on indebtedness have looked at this issue”.

A full copy of the paper, which was presented to a conference on Responsible Credit at the University of Trento, Italy, earlier this week is available here.

EU Directive Threatens to Sweep Away Consumer Protection

2007-05-21T14:38:00.000Z

Consumers could lose vital protections against irresponsible and high cost credit if proposals for a new Consumer Credit Directive are ratified by the European Council of Ministers today.

The proposed EU Directive aims to create a single €800 billion-a-year EU consumer loans market by allowing cross border selling of credit, including internet credit. However, no significant consumer protections have been built into the Directive, and consumers face the prospect of taking out loans with terms and conditions set by the courts in the home country of the lender.

The EU Directive, which has not been debated in national parliaments, fails to introduce a requirement that lenders behave ‘responsibly’ and there is no common agreement across Europe as to which cost elements should form part of the APR on a loan. Many European consumers, for example in France and Germany, could see existing protections such as national interest rate ceilings undermined, whilst in the UK our consumer credit licensing requirements – recently tightened by last year’s Consumer Credit Act – can be ignored by lenders operating from the new EU states.

Professor Reifner of the Hamburg based Institute for Financial Services (IFF) and Chair of the European Coalition for Responsible Credit called on the Council of Ministers to reject the Directive at Monday’s meeting and prepare the way for national Parliaments to debate the Directive openly.

“This Directive fundamentally undermines consumer protection in all EU countries by reducing it to the lowest common denominator. Protections built up through national legislation and years of court rulings are about to be swept aside in the name of the free market. What appals us most is that Ministers have failed to demonstrate even the basic courtesy of openly debating these proposals in their national Parliaments.”

Damon Gibbons, from UK debt campaign Debt on our Doorstep, commented:

“The Secretary of State for Trade & Industry should bring an urgent debate on these proposals to the House of Commons. Consumer awareness of these changes in the UK is next to nil, and there is no mandate for the Government to sign up to this proposal on Monday.”

Motion Laid in Scottish Parliament Welcoming Conference

2007-05-20T20:49:00.000Z

Jackie Baillie, MSP, has put down a motion in the Scottish Parliament welcoming the Debt on our Doorstep/ Citizens Advice Scotland conference taking place in Edinburgh on 29th and 30th May.

The conference, which is now fully booked, will debate the critical issues of responsible credit and fair financial services at a crucial time with banks facing what amounts to a popular rebellion over default charges and increasing concern over extortionate lending and the lack of affordable financial services for low income communities. The motion (see below) goes onto underline the importance of cross part collaboration in Holyrood and Westminster to tackle these concerns.

Activity is also increasing on the European and Global stage, with the European Coalition for Responsible Credit gearing up for a conference in Brussels in September (see www.responsible-credit.net for details); and contacts made by the Global Fair Finance initiative in Japan, Mexico and South Africa.

The motion reads:

*S3M-30 Jackie Baillie: UK Credit Options Conference; ;That the Parliament recognises the crucial importance of fair and affordable credit for all in Scotland; welcomes delegates to the second UK credit options conference in Edinburgh on 29 and 30 May 2007, hosted by citizens advice Scotland and Debt on our Doorstep, and acknowledges the importance of the Cross-Parliamentary Cross-Party Group on Tackling Debt in contributing to full debate of the issues surrounding credit and debt.

ITV Need You!

2007-05-19T20:05:00.000Z

Problems with debt?

ITV is making a programme about debt and its affect on families.

Are you struggling to make the repayments on the credit you owe?
Have you got the debt collectors at the door?
Are you tired, angry, upset and feel you have nowhere else to turn for help?

We would like to hear from you.

Please contact, IN STRICT CONFIDENCE:
020 7737 8455childissues@granadamedia.com

Download a copy of their flyer for your noticeboard here

Graham Norton Snubs Home Credit

2007-05-16T20:28:00.000Z

Following Debt on our Doorstep's intervention, TV presenter Graham Norton has confirmed that he will refuse to make an award to home credit lenders at tomorrow's Credit Today Magazine Awards Ceremony, due to take place in London's Grosvenor Hotel.

Today Graham's agent, Dylan Hearn, said that having been made aware of the issues, Norton did not wish to be associated with such an award - although he will continue to host the overall event.

Damon Gibbons, Chair of Debt on our Doorstep said: "We're delighted that Graham has agreed to sit out that part of the ceremony, and send out such a message. These lenders crave recognition as part of the mainstream credit industry but they only further reduce the incomes of low income borrowers. They cannot be part of the solution to poverty in the U.K."

Government Remains Complacent about Debt Problems

2007-05-15T10:41:00.000Z

The Government's latest report on household debt levels retains its complacent attitude to Britain's credit problems. In line with the approach taken in previous reports, no analysis of the extent of debt problems by income group is undertaken, and only general remarks concerning average debt levels is provided.

As debt levels have risen, the Government argues, so too has wealth - in the form of house prices. Additionally, the DTI report stresses that, on average, the ratio of savings to debt has remained constant - so people have the ability to use savings to cover immediate problems in debt repayments.

However, this ignores the fact that for the poorest the position with mortgages, house prices and saving is irrelevant - they rent their homes and half of them have no savings at all. For this group, the growth in their unsecured debt burden in recent years now represents a form of additional taxation that must be paid from their future incomes, deepening effective child poverty levels. Although the general level of unsecured debt has not increased in the last six months, this is unlikely to be evenly distributed across the income scale, with a greater increase in the debt burden of the poorest entirely possible even though the average has remained static. This is borne out by an earlier Bank of England report (based on data from the NMG survey in 2006), which reported that the unsecured debt burden for renters was continuing to increase.

Whilst the Bank of England dismissed this increase as largely irrelevant in terms of its impact on the macro-economy due to the relatively small level of total debt owed by renters compared to mortgagors, it is still extremely relevant to the Government's achievement of its child poverty targets and should not be ignored by the DTI report which is published as part of the Government's broader over-indebtedness action plan.

In relation to mortgage lending, the report fails to note that effective interest rates are at their highest level since 1991, due to the fact that secured lending has outstripped both retail price inflation and the growth in wages. As a result, relatively small increases in interest rates now have a greater impact on those mortgage holders that cannot afford to move themselves onto fixed rates.

In response to the situation, Debt on our Doorstep have today written to the DTI requesting that they provide an analysis of household debt by income level in all future reports and explain why effective interest rates are not reported.

Don't do it Graham!

2007-05-14T18:22:00.000Z

It may be something he won't be proud to tell his viewers about, but TV and radio personality Graham Norton, pictured, could find himself presenting an award to lenders charging over 1,000% interest this week.

The Irish comedian is due to host Credit Today magazine's annual awards ceremony at London's prestigious Grosvenor Hotel, Park Lane on Thursday night. But some of the lenders that he could be shaking hands with include extortionate home credit providers Bristol Finance and Credit Services Ltd, which charges £40 interest on a £100 loan given over just 14 weeks. That's a whopper of a rip off Graham - an APR of 1068.5%!

The Home Credit or door to door lending market was recently found by the Competition Commission inquiry to be making excessive profits amounting to over £75 million per year. A range of measures are due to be implemented next year to address this, but in the meantime lenders like Bristol Finance and Credit are able to continue to rip off low income customers.

Other lenders up for an award in the category of 'Home Credit Lender of the Year' (we kid you not!), include Shoppacheck, the subject of previous TV undercover reporting, and last year's winner SD Taylor -a subsidiary of S&U plc in which ex-Tory M.P Derek Coombs, holds a £30 million stake.

If you think Graham is doing the wrong thing by presenting an award to these lenders, then contact him via his website (www.grahamnorton.net)- and let him know what you think.

Personal Insolvencies Rise Again

2007-05-04T09:43:00.000Z

The first quarter of 2007 saw 30,075 people go bust, an increase in personal insolvencies of 23.9% on the same period one year ago, according to figures released today by the Insolvency Service. Whilst bankruptcies rose 10% to 16,842, Individual Voluntary Arrangements accelerated by 47.6% over the past 12 months to 13,233.

Commenting on the figures, Damon Gibbons - Chair of Debt on our Doorstep - said:

"That over 30,000 households in a single three month period have had to resort to extreme measures and declare themselves insolvent reflects a severe indebtedness problem in this country. We should remember that every county court judgment, insolvency, and respossession increases the market for high cost credit as people are excluded from mainstream financial services. The challenge for Government is to ensure that people going insolvent are given a way back into the financial services mainstream as soon as possible. In that respect, the growth of IVA's as opposed to full bankruptcy is perhaps the only good news in these figures."

Scots Tenants Offered Affordable Credit by Housing Association

2007-04-26T20:15:00.000Z

Margaret Blackwood Housing Association and Dunfermline Building Society have announced a preferential savings and loans scheme for tenants.

Unveiled at the Chartered Institute of Housing’s Financial Inclusion seminar in Edinburgh, the initiative will enable tenants and sharing owners to open an instant access savings account that will offer a preferential rate of interest on balances as small as £1.

Once account holders have made at least two deposits, they become entitled to apply for a loan of up to £500 at a flat rate of interest that is just 0.95% above the Bank of England’s base lending rate.

Jeremy Hewer, Project Manager for Margaret Blackwood Housing Association, said: “We are delighted to offer our tenants the opportunity of getting a high rate of interest on their savings as well as access to more affordable credit.

“Most high street lenders are just not interested in providing small, unsecured loans. This scheme fulfils a demand that has, up to now, been met by doorstep lenders charging exorbitant interest rates.”

Ken Dow, Senior Manager – Community Development at Dunfermline Building Society, said: “The Society is delighted to partner Margaret Blackwood Housing Association in this wider action initiative.

"The Savings & Loans scheme has been specifically designed to assist Housing Association tenants and allow them to make informed and affordable choices when dealing with their personal finances.”

This is the second programme reflecting Margaret Blackwood Housing Association’s commitment to promoting financial inclusion.

Jeremy Hewer explained: “This scheme complements our involvement in a Wider Role-funded initiative within Edinburgh. We have joined up with four other housing associations and with the local Citizens Advice Bureaux to provide financial health checks, advice and counselling to new tenants and tenants who have debt issues.

“But Edinburgh is only one of the 29 Scottish local authority areas in which we operate. We want to provide a nationwide service which improves the general level of financial literacy.

“We would like to hear from other RSLs who might partner us in delivering a comprehensive financial and welfare benefits advice service elsewhere in Scotland. They can contact me on 0131 317 0169 or email me at JeremyH@mbha.org.uk”

Bradford Debt Seminar, Sat 5th May

2007-04-26T19:43:00.000Z

Bradford, the home of Provident Financial, is to host a seminar event to discuss the development of local financial inclusion and debt strategies on Saturday 5th May.

The event is being organise by The Rev Chris Howson, city centre mission priest for the Bradford Church of England diocese, who said: "We have some excellent speakers from Leeds and Sheffield - places that already have a new strategic plan about debt - that we could learn from. Damon Gibbons, founder of the Debt on the Doorstep campaign, will also be with us."

To register for the event, which is being held at Bradford University on May 5, from 1-4pm, contact Mr Howson on (01274) 727034.

Is Britain A World Leader in Financial Services Provision?

2007-04-03T11:43:00.000Z

A recently published report comparing Britain and Germany's banking systems cast dount on the claim that Britain is a world leader when it comes to financial services provision.

The report, "The British Banking System: A Good Role Model for Germany?" published by the Anglo-German Foundation for the Industrial Society and written by academics frm the Universities of Birmingham and Heidelberg, focuses particular attention on the levels of financial exclusion and over-indebtedness in the UK that have resulted from the demutualisation of building societies and an absence of proper regulation.

"there seem to be fewer problems with over-indebted households in Germany than in Britain. The more widespread use of credit cards in Britain could be responsible for this. Aggressive marketing of these cards as well as excessively high penalty charges to credit card users who pay late, or are unable to clear their balances, contribute to the problem of over-indebtedness. The punitive charging in Britain is indicative of much more widespread cross-subsidisation in the provision of current accounts – high-balance, low-volume users generally cross-subsidise low balance high volume users due to low deposit interest payments and low charges (for those who stay within authorised credit limits, with punitive charges for those who do not, or cannot).

The relatively high profitability of British banks in recent years may therefore owe much to exploitation of their ‘complex monopoly’ power. In contrast, the lower profitability of German banks is associated with a broader supply of financial services to small enterprises and low-income households. However, the Sparkassen (municipal savings banks) and co-operative banks, which are the most active banks in these market segments, have had an above average profitability in Germany. These findings should be borne in mind by advocates of increased concentration trying to shift the German system towards the British model.

Public sector and co-operative savings banks are no longer a significant force in Britain, and indeed the government has been encouraging the development of Community Development Financial Institutions (CDFIs) and credit unions to fill the gap. Advocates of privatisation of the German public savings bank should also bear this in mind."

OFT - No 'Quick Fix' on Bank Charges

2007-04-01T10:47:00.000Z

The OFT has backed off from making an immediate intervention to help consumers recover bank charges. In a move that will disappoint those millions of consumers that have been on the receiving end of illegal charges the OFT has announced that a review of charging policies will take place alongside a wider 'in-depth' study of retail bank pricing. Full details of the study will be announced in late April, and it is expected to be completed by the end of the year.

In a statement released on 29th March, clearly influenced by the industry, the OFT expresses ongoing concern about the level and incidence of bank current account charges, but sets out its desire to look at the wider relationship between default charges and so called 'free' banking.

John Fingleton, OFT Chief Executive said: 'The UK retail banking market performs well in many dimensions, especially relative to international norms. However, the issue of bank current account charges is a matter of real concern to the banks' customers, and raises wider questions about competition and transparency of pricing. The initial scoping work we have undertaken has demonstrated to us that this is not only an issue for those people who are being charged, but also for customers who are not defaulting on their bank accounts.'

Debt on our Doorstep expresses concern that no action has yet been taken by the OFT to force banks to reimburse customers for the billions of pounds of unlawful charges that have been levied in the past six years, and that there appears to be a willingness to look the other way whilst charges are levied on those with the most financial problems in order to maintain a system of free banking for others.

Damon Gibbons, Chair of Debt on our Doorstep commented:

"The levying of unlawful fees on default is cross-subsidisation at its worst. It makes those with financial problems pay for free current account provision for those without difficulties. If the banks say that they would have to end free banking for the majority by staying within the law on default charges, then that would appear to indicate a real lack of competition in the sector.

Surely, banks should still be expected to compete on current account charges and stay within the law for people who have financial problems. Why it is taking the OFT so long to come that conclusion is a real mystery, but it isn't giving consumers a great deal of confidence in their regulator that's for sure."

Treasury Proposes Financial Inclusion Strategy

2007-03-29T08:42:00.000Z

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"

New Look Dood Newsletter Published

2007-03-27T18:49:00.000Z

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

2007-03-27T17:31:00.000Z

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!

2007-03-27T10:29:00.000Z

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.

Please contact, IN STRICT CONFIDENCE:
Claire Garner
020 7578 4216
claire.garner@itv.com

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

Credit Unions Launch Current Accounts

2007-03-17T11:03:00.000Z

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

2007-03-17T10:48:00.000Z

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

2007-03-17T09:46:00.000Z

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

2007-03-17T09:43:00.000Z

From the Statesman Journal, Oregon

MICHAEL LEACHMAN

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 mleachman@ocpp.org.

Families stuck in payday lending trouble

2007-03-17T09:40:00.000Z

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.

Provident Customers and Profits Up As Banks Tighten Lending Criteria

2007-03-15T13:58:00.000Z

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

2007-03-15T13:32:00.000Z

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.

Petition Against Bailiff Violence

2007-03-13T08:25:00.000Z

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.

DOWNING STREET PETITION

http://petitions.pm.gov.uk/Bailiff-Violence

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

Background
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.

Poor Pay More

2007-03-07T20:24:00.000Z

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 http://www.fwa.org.uk/about_campaigning.html and supporters are urged to e-mail Gordon Brown from the same website.

Complaints about Default Charges Soar

2007-02-24T07:15:00.000Z

The BBC reports that complaints concerning bank default charges are soaring, with over 1,000 people calling the Financial Services Ombudsman on this issue every day.

The Ombudsman is taking on about 150 penalty charge cases a week, but the number of phone calls it receives from consumers looking to find out how to get penalty charges refunded is far greater. On Wednesday, following coverage of the issue by BBC's Wathchdog programme, over 3,000 calls were made to the Ombudsman.

The level of complaints being made is being compared to the endowment mis-selling scandal and is now the single biggest area of consumer complaints.

"Previously the largest number of complaints we received related to endowments," a spokeswoman said.

"However, we are getting at least three penalty charge calls for each one about endowments at present."

Unlike the endowment mis-selling scandal, however, the regulators and Government continue to fail to force the industry to take pro-active steps to provide consumers with redress, leaving all of the onus for action on the individual. Perhaps that is the greatest scandal of all...

Capital One fined for PPI Mis-selling

2007-02-24T07:10:00.000Z

Capital One Bank has become the latest lender to be fined by the FSA for failing to protect consumers against the risk of being mis-sold insurance policies.

The credit card firm was found to have neglected to ensure that 50,000 customers received important information about Payment Protection Insurance and has been fined £175,000 - although none of the fine will find its way back to borrowers.

The FSA found that Capital One had inadequate systems and controls for selling PPI insurance and thus failed to treat its customers fairly. During 2005, Capital One sold approximately 335,000 PPI policies on UK credit cards.

Margaret Cole, director of enforcement at the GFSA, said: "We are determined to see much better practice in PPI.

"It is unacceptable for people to be put at risk of buying unsuitable protection insurance through not being given the right information at the right time."

U.S Payday Lender Hits Paydirt in the UK

2007-02-14T15:03:00.001Z

US Payday lender, Dollar Financial, has found rich pickings in the UK in the past year. The firm, which trades through 250 MoneyShop outlets in the U.K, further expanded its operations here by opening four new stores in the last quarter.

Moneyshop offers cheque chashing, pawnbroking, consumer loans (at 123% APR), payday loans and pre-paid credit cards to people (with minimal inquiries into their ability to repay), and is characterised by brash advertising of people holding wads of cash in their hands, and promises of instant decisions.

The company's latest quarter financial highlights reveal that the UK operation is expanding rapidly:

UK cheque cashing revenue up 20.5% on last year to $10.7 million

Amount of lending on those 123% APR loans up by 22.6% to £50.8 million

Jeff Weiss, Chairman of Dollar Finance, who is reported as earning $1.83 million per year, has been busy in the U.S defending the Payday lending industry from legislation to restrict interest rates. Since a cap on payday lending rates (at 36%) was brought in for U.S military personnel, a number of U.S states have been campaigning for similiar protections for their residents. Only yesterday a new bill was passed in Oregon's House of Representatives that proposes a 36 percent interest rate cap on short-term car title loans and on Internet payday loans that do business in Oregon, would restrict fees charged by check cashers, and create an electronic tracking system for payday loan borrowers to make it difficult for short-term lenders to use a different lending license to circumvent interest rate caps.

Further anti-payday lending laws are in progress in South Carolina where a bill was introduced into the General Assembly this week by Republican Senator Alan Clemmons that would limit the annual interest rate payday loan companies may charge their customers to 36 percent, plus a $5 administrative fee per loan. In Virginia, a compromise bill (with the support of the industry) looks set to be passed that will establish a database to track borrowing activity and limit customers to three outstanding loans at the same time. Repeat borrowers - someone who gets four loans in a row - could qualify for a 60-day repayment plan, at no cost, to escape the cycle of debt.

So all of this begs the question, why aren't UK borrowers being provided with the same levels of protection that U.S borrowers enjoy, even though the company they borrow from and the lending model that it uses in both countries is the same?

Charity Offers Help With Fuel Poverty

2007-02-14T08:59:00.000Z

Customers of British Gas across the country who are struggling with fuel debts were today being urged to contact a national charity for help.

The British Gas Energy Trust is urging people to contact them as they can clear fuel debts and also help with other household bills and costs including the replacement or repair of condemned gas appliances.

Charity chiefs said they have so far handed more than £2 million to over 5,000 individuals across the UK who were in fuel poverty and struggling to afford to heat their homes.

To find out more or for an application form please visit the trust's website at www.britishgasenergytrust.org.uk or phone 01733 421021.

Singapore - Responsible Lending Requirements & Rate Caps

2007-02-13T19:20:00.000Z

Changes to Singapore's responsible lending requirements have been welcomed by banks including Citibank, which continue to operate in a legislative environment that includes a duty to make full and proper assessment of borrowers' circumstances and interest rate caps on small sum credit. Article from Channel News Asia, dated 1st February 2007 follows.

By Loh Kim Chin, Channel NewsAsia

SINGAPORE: You will now qualify to apply for unsecured credit facilities with banks – if you earn at least S$20,000 a year.

The Monetary Authority of Singapore (MAS) and the Law Ministry (MinLaw) have decided to relax the rules on such facilities.

Previously, applicants had to earn at least S$30,000 per annum.

Unsecured credit refers to things like overdraft facilities where people pay interest from the time they draw down on the sum.

The latest rules do not apply to credit cards, which still require a minimum income of S$30,000 a year.

There will also be a more conservative maximum credit limit.

Those earning between S$20,000 and S$30,000 a year can only borrow up to twice their monthly income.

But if they earn at least S$30,000 a year, they can borrow up to four times their monthly pay.

There will also be changes to the moneylenders’ regime.

For instance, for unsecured loans of S$3,000 and below, there will be no minimum income requirement but such loans will be subjected to an interest rate cap.

To mitigate the risks of over-borrowing by individuals from all income groups, MAS and MinLaw will require financial institutions and moneylenders to conduct adequate and relevant checks on borrowers before lending.

MAS and MinLaw will make the relevant legislative changes to the Unsecured Credit Regulations and the Moneylenders Rules by the middle of the year.

The new rules are expected to level the playing field among banks which are regulated by MAS, and lending by other businesses.

Banks have welcomed the move.

Citibank says it will be assessing this new area of opportunity in greater detail to serve the needs of these consumers.

This group of customers is estimated to number between 450,000 and 500,000.

OCBC says the changes will give borrowers more options and open up opportunities for a group of individuals who previously had limited access to unsecured facilities. - CNA/so