Use Unclaimed Money to Tackle Rip Off Lenders

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.”