Tagged: payday lenders

Rap song released in tribute to Archbishop of Canterbury’s payday loan stance

A Rap song has been released in tribute to the Archbishop of Canterbury‘s warnings about payday loans.

We Need A Union On The Streets, by music producer Charles Bailey and featuring the rapper Question Musiq, was inspired by the former Bishop of Durham, the Most Rev Justin Welby‘s efforts to expand Britain’s network of credit unions.

The song tells the story of young people who get into debt because of payday loans and features the words of personal finance guru Martin Lewis in which he warns that “payday loans gone wrong are a horrendous thing”.

The song has the chorus

What we need is a union, we need a union on the streets/Everybody hand in hand, people can’t you understand”

and the verse

“Yeah it’s unfair/But they don’t care/The rich get richer/While poor get less”.

The release comes after a national network aimed at offering an alternative to payday lenders was launched last month by Sir Hector Sants, who is heading a task group for the Archbishop on promoting credit unions.

The scheme is being piloted in the Southwark, Liverpool and London Church of England dioceses.

Mr Bailey, who has worked on social campaigns to combat gun violence and has also set the speeches of the late Tony Benn to music, said he had felt “moved” to help the task group.

When I listened to the Archbishop of Canterbury speaking out about pay day lenders I felt moved to do something to help his task group to reach to the urban youth who are often the victims and introduce them to a much safer and ethical way of borrowing through credit unions,” he said.

Mr Lewis said: “The payday loan industry is relatively new, and has used powerful marketing to build its business and groom young people to think it is normal.

 “It isn’t normal, it’s an extremely expensive way to borrow that most should avoid.”

Dr Elizabeth Henry, the Church of England’s adviser for minority ethnic Anglican concerns, said: “Efforts like this help the Church to extend its reach and engage with people on issues that affect their everyday lives.

“The song is appealing and I hope will get the message across to all communities that credit unions are a much safer way to borrow.”

The pay day lenders have argued that their loans are intended to be repaid over a short term and fill a gap left by the High Street banks. But Archbishop Welby has expressed concern that these loans are tempting people into a spiral of debt.

The Consumer Finance Association declined to comment on the recording.

Source –  Durham Times,  11 July 2014

Benefit sanctions drive Newcastle families to payday lenders

Families are being forced into taking payday loans to cope with benefit delays, a city advice group has warned.

Newcastle Citizens Advice Bureau says the region has seen a 206% increase in the number of Job Seeker’s Allowance cases in just one year after Government rules came in which see benefits stopped as punishment for not finding a job.

While ministers say they want to force people to take job hunting seriously, the bureau says the strict new regime is having a different impact.

Shona Alexander, chief executive of Newcastle CAB, said that the longer minimum sanction period – when people are left without the financial support of their benefit – is having a counter-productive effect.

Claimants are distracted from job hunting as they focus on putting food on the table and keeping a roof over their head.

She added: “We see people here every day who have had their benefits sanctioned and who are desperate for money.

“They are often forced into the hands of payday lenders, which only make things worse.

“Sanctions often have a negative effect on our clients’ mental health. Being sanctioned can actually put someone further away from the workplace.

“They’re so busy trying to put food on the table and worrying about debts that they can’t look for a job.

“Some people don’t even know when they’ve been sanctioned, so by the time the money stops there’s no time for emergency budgeting, challenging the sanction or applying for hardship payments.

“For the first week they’ll struggle to get by, scraping up every penny.

“The second week they might borrow from family or friends, but by the third week they are desperate, and that’s when they come to us.”

In the North East, around 13% of those seeking work have had their benefits docked as a punishment for mistakes such as turning down an interview.

The extra pressure and financial burden caused by sanctions means parents struggle to put food on the table, pushing people further into debt and impacting upon their health.

The Government has previously defended the move, with employment minister Esther McVey saying: “Sanctions are used as a deterrent. The vast, vast majority of people don’t get sanctions.

“When you get Job Seeker’s Allowance – there’s a clue there in the name, job seeker’s allowance – you are paid that to make sure you are doing all you can do to get a job.”

More than £7m is thought to have been spent on appeal tribunals.

Source – Newcastle Evening Chronicle  22 April 2014

Councils Sit On £67m In Emergency Help For Poor

This article was written by Patrick Butler, George Arnett, Sarah Marsh and Samir Jeraj, for The Guardian on Sunday 20th April 2014

A fledgling scheme to provide emergency help to the poorest in the country is in chaos, with £67m left unspent and record numbers of families being turned away.

Figures released in response to Freedom of Information Act requests indicate that by the end of January councils in England were sitting on £67m of the £136m that had been allocated to local welfare schemes. Half of local authorities had spent less than 40% of their funds.

An analysis by the Guardian shows that under the new local welfare assistance schemes, four in 10 applications for emergency funds are turned down, despite evidence that many applicants have been made penniless by benefits sanctions and delays in processing benefit claims. Under the previous system – the social fund – just two in 10 were. In some parts of the country, as few as one in 10 applicants obtain crisis help.

The schemes were designed to help low-income families in crisis, such as those in danger of becoming homeless or subjected to domestic violence. Charities and MPs have warned that those denied help are turning to food banks and loan sharks.

Gillian Guy, chief executive of Citizens Advice, which offers debt and legal advice, said the emergency financial support system was in chaos. “When the safety net fails, people are left with no way of putting food on the table, paying the rent or keeping the lights on. Confusion over what help is available and who to approach means that people who need support are left high and dry.

“People are in danger of being pushed into the arms of payday lenders and loan sharks by the chaotic emergency support system. Citizens Advice bureaux see people in desperate need of support who have nowhere else to turn when jobcentres and the local council don’t give out support.”

Under the new system, emergency funds are no longer ringfenced, meaning that councils can divert unspent cash to other budgets. Local welfare assistance schemes were created a year ago in 150 English authorities, alongside national schemes in Wales and Scotland, following the abolition of the social fund.

Most schemes do not offer cash or loans, but support in kind, such as food parcels and supermarket vouchers. The social fund provided loans repayable against future benefit payments – typically about £50 – and larger capital grants to destitute families who needed help to furnish flats or replace broken domestic appliances.

Despite charities reporting that demand for help has rocketed as a result of economic hardship and welfare cuts, some councils spent more money setting up and administering their welfare schemes than they gave to needy applicants.

Councils told the Guardian they had provided less in emergency funding than in the past because there was a lack of public awareness of the new system. Some had failed to advertise their schemes, while others set such tight eligibility criteria that many applicants – typically including low-paid working families, benefit claimants and those deemed to have not lived in their local area for long enough – were turned away.

Simon Danczuk, the Labour MP for Rochdale, who has repeatedly raised the issue of local welfare in parliament, said his constituents frequently reported struggles to get crisis help. Constituents he has helped include:

• A low-wage family with three children, including an 11-month-old baby, who applied for £35 to pay for gas, electricity and baby food to help them until payday. The council scheme initially referred the family to a food bank. After lobbying by Danczuk, they were given £20 for energy costs, but were refused money for baby food.

• A pregnant mother and her partner, who after benefit changes were left with £7 a week for food after rent and council tax. They were told that they could not apply as the scheme was for “genuine emergencies” such as fires and flood.

In each case Danczuk believes the families would have qualified for emergency support under the social fund. “Central and local government are pushing people into the hands of payday loan companies and food banks. They have in effect privatised the lender of last resort,” he said.

A spokesman for the Department for Work and Pensions, which funds local welfare schemes run by 150 local authorities across England, said: “In contrast to a centralised grant system that was poorly targeted, councils can now choose how best to support those most in need. It is for local councils to decide how they spend their budgets.”

But a Conservative council leader has called on the government to reinstate local welfare assistance funding, calling it a “cut too far”. Louise Goldsmith, leader of West Sussex county council, said the proposed cut would leave many low income families without vital support when they were going through a “tough patch in their lives”.

A briefing note prepared by the council found that 43% of 5,582 individuals and families helped by the local welfare fund to the end of February had applied because they had been left penniless by benefit sanctions and delays.

The Local Government Association has called upon the ministers to reverse the cut, and it is understood a number of councils and welfare charities are preparing to seek a judicial review of the government’s decision to cut local welfare assistance funding in April 2015.

Many councils are using part of their welfare assistance allocation to provide financial support for local food banks, which provide penniless applicants with charity food parcels.

Lady Stowell, a local government minister, told the House of Lords in January that local authorities were “doing a good job of supporting people in times of crisis and are doing it without using all the funding that has been provided so far from DWP”.

But Centrepoint, the homelessness charity said that local welfare assistance underspending meant many homeless youngsters could not get vital support when they moved from hostels into independent living. “Councils need to start using these funds to address urgent need now and ensure that young people have access to it,” said Seyi Obakin, Centrepoint’s chief executive.

Two local authorities – Labour-run Nottinghamshire county council and Tory-run Oxfordshire – have scrapped local welfare assistance altogether and plan to divert the money into social care services..

Conservative-run Herefordshire  county council had spent less than £5,000 of its annual £377,000 allocation by the end of December last year, equivalent to 1% of its local welfare budget.It said its spending reflected low demand for crisis help, a claim disputed by Hereford Citizens Advice and Hereford food bank, which said they had been inundated with requests.

Labour-run Islington council had spent 80% of its emergency funds budget by the end of December last year and had spent all its emergency funds by April. It said it had encouraged its frontline staff to refer individuals to its local welfare scheme to ensure they got crisis help and assistance with any underlying problems, such as debt.

Local authorities are anticipating further problems over local welfare in 2015 when the DWP scraps funding for the schemes. Councils, charities and MPs have called on the government to restore and ringfence the crisis support allocation.

Councils say that in some cases they have refused emergency help because benefit claimants have been wrongly referred to local authority welfare schemes by jobcentres. Some councils have refused to accept applications from those who ought to have been offered a short-term benefit advance from their local jobcentre.

Scotland and Wales have their own welfare assistance schemes and these have higher applicant success rates than in England. In Northern Ireland, which still has the social fund, 70% of applicants received help.

Source – Welfare News Service  20 April 2014

http://welfarenewsservice.com/councils-sit-on-67m-in-emergency-help-for-poor/

‘We can’t cut Wonga links’ says South Tyneside Council boss

A South Tyneside Council leader has denied double standards after the authority launched a crusade against payday lenders.

At a meeting of the full council last week, a motion was passed to introduce a series of measures against high interest lenders.

Action includes blocking access to lenders’ websites from council computers, working with partners to stop the promotion of such firms and to lobby for an extension to planning and licensing powers to prevent them locating in South Tyneside.

But one of the motion’s signataries, Coun Allan West, has now been forced to defend the move after it emerged the authority, along with the four other Tyne and Wear councils, pays into a pension fund which has £233,000 invested in Wonga shares.

Today Coun West, the council’s lead member for adult social care and support services, said legal regulations prevent the authority, which administers the fund, from cutting its “indirect” ties with the payday lender.

He said: “We are raising the issue of payday lending because it is the right thing to do.

“At times of financial pressure, it can feel like payday lenders are the only option, but their extortionate rates can trap people in a vicious circle of increasing debt and interest payments.

“The council administers the Tyne and Wear Pension Fund on behalf of 140 different organisations and we are bound by some very clear legal restrictions as to how the fund is allowed to operate.

“Case law and local government pension scheme regulations specifically require the fund to seek the best possible return on its investments and only allow us to consider social and ethical issues when they have a financial impact.

“The Pension Fund has no direct investments in payday lenders, but does have a very small indirect holding via Pooled Investment Vehicles as part of its global private equity programme.

“This is similar to a private individual investing in a unit trust and having very limited influence on how those investments are made.

“These indirect holdings represent a tiny proportion of the fund’s investments – about 0.005 per cent of its total value, which currently stands at £5.6bn.

“We are very keen to invest as ethically as possible, but the pension fund issue is extremely complex, and something that all local government pension funds are grappling with on a national level.

“There is a lot we can do on a local level to make a difference and ensure that people have an alternative. We have recently reorganised our welfare rights service to ensure it can help more people with financial problems, and The Bridges Community Bank in South Shields is a non-profit service that offers far lower rates.

“There are also encouraging signs that the new Financial Conduct Authority is ready to cap the cost of loans and provide increased protection for vulnerable borrowers.

“In the long term these things will either encourage payday lenders to improve their practices or it will impact on their profits, which in turn would make it easier for pension funds to invest elsewhere while staying within the law.”

Source – Shields Gazette,  17 March 2014

South Tyneside Waging war on payday lenders

Council leaders in South Tyneside are being asked to launch a crusade against high-interest rate lenders.

The move comes as the Citizens Advice Bureau in South Shields says the number of people approaching it with debts resulting from payday loans has doubled in the last two years and the average amount owed is £1,610.

A motion, to go before a full meeting of South Tyneside Council council later this week, calls for a series of measures to clampdown on lenders like Wonga, The Money Shop, Quickquid and Payday UK.

The recommendations are:

* Blocking access to loan company websites from council-owned computers.

* Issuing public warnings about the dangers of payday lenders.

* Work with partners to stop lenders locating in South Tyneside and prevent them promoting their businesses in the borough.

* Try to get licensing powers extended to limit the expansion of lenders in the borough.

* Provide debt advice to people affected by lenders.

* Promote the Bridge Community Bank in South Shields as an alternative lender.

> If it’s any incentive, I’ve got an account with The Bridge !

http://www.bridgescommunitybank.org.uk

The Money Shop, which has an outlet in Fowler Street, South Shields, offers an annual interest rate of 390.94 per cent and an annual percentage rate – the rate for a payment period, multiplied by the number of payment periods in a year – of 2,962 per cent.

Anyone taking out a £200 loan would face repaying – in a single payment, within 28 days – £259.98.

Coun Allan West, the council’s lead member for adult social care and support services, is a signatary to the motion, and says he is concerned that the most vulnerable people in the borough are falling foul of the lenders.

He said: “It is easy to understand the financial pressures that lead people to rely on payday lenders, but their excessive interest rates mean there is a real risk of a short-term financial issue turning into a long-term spiral of increasing debt and interest payments. A national cap on the cost of lending would go a long way towards protecting some of our most vulnerable citizens from the dangers of payday lending.”

He added: “In the meantime there is a lot we can do locally, by letting people know about options like The Bridges Community Bank, which offers much lower rates, as well as keeping money in the local economy.

“I would encourage anyone who has financial problems or concerns about the Government’s changes to the welfare system to contact the council’s welfare rights service on 424 6040.”

The full council meets at South Shields Town Hall at 6pm on Thursday.

Payday  lending firms have become a major political issue in recent years.

Many councils already block access to lenders’ websites from libraries and other public buildings and South Shields MP Emma Lewell-Buck, last year, signed a national charter – supported by some of Britain’s biggest debt, consumer and anti-poverty organisations, including Which?, Citizens Advice, StepChange Debt Charity and Church Action on Poverty – calling for tougher regulation of payday lenders.

In October 2012, Newcastle United sparked a storm when the club announced a four-year sponsorship deal with Wonga.com.

The payday loan company now has its name on the club’s shirts.

Wansbeck MP Ian Lavery labelled the company “morally bankrupt” on social networking site Twitter.

Before the start of this season, the club’s star striker, Papiss Cisse, said he would not wear the club shirt bearing a Wonga logo on religious grounds, but the row was resolved in time for the club’s warm-up match against St Mirren.

Source – Shields Gazette,  11 March 2014

Beware of the loan sharks

Payday loan sharks have trapped an increasing number of Brits into unmanageable debts and new research has revealed that this problem is increasingly getting worse.

In fact, a new report from the charity StepChange showed that the number of people seeking relief from payday lenders has shot up by 82 per cent.

Worryingly most of those vulnerable people seeking help had racked up thousands of pounds worth of debt after taking out more than one loan.

According to StepChange, people seeking advice in 2013 held an average of three payday loans, but at least 13,800 had five or more. The average debt was £1,647, significantly more than the average person’s monthly income of £1,381.

Many people make the mistake of taking out a payday loan believing that it is “easy money”.

However, payday loan companies are little more than legalised loan sharks that prey on vulnerable and low-income people and trap them into a cycle of debt that they cannot get rid of.

Many firms such as Wonga charge annual percentage rates (APR) of 4214%. To put it in layman’s terms and get an idea of just how quickly debt can balloon out of control, if you took out a loan of £3000 at 20 per cent APR (way below the average) and made the minimum repayment of two per cent or £5 per month, it would take you a whopping 90 years to pay it all back.

That is just at 20 per cent APR. Not at 4214% which was correct at the time this story went to print.

Now it is worth noting that the Financial Conduct Authority (FCA) assumes responsibility for the regulation of consumer credit in April.

Mike O’Connor, Chief Executive of StepChange Debt Charity, said that he hopes the FCA will address some of these issues.

He added: “The widespread harm and misery caused by payday loans continue unabated. The industry has failed to address the problems causing untold misery and damage to financially vulnerable consumers across the UK”.
“We hope the FCA’s proposals will address some of the areas of consumer detriment, but on issues such as affordability checking, rollover and repeat borrowing, there is an urgent need for even more radical reform”.

Unfortunately that seems unlikely, when you consider the corporate interests in maintaining high debt levels.

In fact, the StepChange charity highlighted the case of one man whose original £200 debt grew to £1,851 in just three months, thanks to inflated interest rates.

And this highlights an important problem. Most people simply do not realise just how rapidly their debts can run into the thousands before they take out a loan.

Fewer people realise that payday loan firms such as Wonga have previously advised the government on how to deal with consumer debt in the UK.

This essentially means that the government is working alongside those very companies who help to trap people into debt in the first place.

Further research conducted by YouGov for StepChange Debt Charity found that at least 26.3 million people had been offered high-interest credit such as payday loans via unsolicited marketing calls or texts.

These are often taken up by vulnerable, or desperate people who are uneducated about the high costs of loans.

And in most schools across the UK, financial management is not part of the curriculum.

Therefore, if you are struggling with money problems, avoid payday loan companies at all costs. It is better to speak to an independent charity or financial advisor who will offer help and advice for free and advise you on ways that you can make your budget go further.

> Or credit unions.

Source –  Akashic Times,  28 Feb 2014

http://akashictimes.co.uk/beware-of-the-loan-sharks-charity-highlights-predatory-behaviour-of-payday-lenders/

On Yer Bike ! The Ghost Of Tebbit Rides Again

Old Tory policies die hard – or perhaps they (like Labour, LibDems, UKIP, etc) just dont have the depth of imagination to think up new innovative ones.

Whatever, another Thatcherite policy rears its ugly head again. All the way from the days when they seriously considered cutting cities like Liverpoool adrift to die, comes a reprise of Norman Tebbit’s “on yer bike” advice.

An article in The Economist titled Some towns cannot be preserved. Save their inhabitants instead  informs us that –

“Middlesbrough, Burnley, Hartlepool, Hull and many others were in trouble even before the financial crisis. These days their unemployment rates are roughly double the national average, and talented young people are draining away. Their high streets are thick with betting shops and payday lenders, if they are not empty.

“Under the last Labour government these towns were propped up on piles of public money. Some built museums and arts centres in an attempt to draw tourists, though this rarely worked. All became dependent on welfare.

“But there is little money for grand projects these days. And cuts to welfare, enacted by the Conservative-led coalition government in an attempt to balance the books, are falling brutally there. In Hartlepool the cuts amount to £712 for every working-age person. In Guildford, a middle-class commuter town south of London, they add up to just £263.”

So, nothing we didn’t already know. Can you guess what the remedy is going to be ?

“Governments should not try to rescue failing towns. Instead, they should support the people who live in them.

That means helping them to commute or move to places where there are jobs—and giving them the skills to get those jobs.”

Ok, right – so that means we all have to uproot and head for the South East ? And, if/when we manage to scrabble to the top of the heap and win the coveted prize of a minimum wage service industry job, where are we going to live ? Some London boroughs are already enacting what amounts to economic cleansing of the poor when it comes to housing.

Still, perhaps we’ll see the esthablishment of squatter camps outside the city limits, from where those with jobs can be bussed in every day to labour for their pennies.

Actually, the article may have been thinking along similar lines – “…new communities can be created in growing suburbs fringing successful cities. It has happened before.”

It certainly has. But that doesn’t mean it’s a good thing. Finally, I’d like to quote one of the comments published in response to the article, which I think succinctly sums up the problems that the piece’s author evidently failed to forsee –

“The obvious consequence of this article is that you support the people by moving them from “dead” areas to “live” areas like, er, London and the Greater South East. Obviously in leaving a dead area you will get very little for your house (after all it is being effectively abandoned), so you will have to be subsidised in the South – or live on the streets – something I don’t think the locals in London like.

Then of course the problem is London
– The motorways are clogged (despite having more lanes than anywhere else in the country),

– the railways are apparently a hell hole (despite having better rolling stock than the rail-buses we still have where I live and despite getting the Crossrail investment and tube extensions),

– the airports are apparently even worse (despite or possibly because of a hogging of international connections)

– Housing is a nightmare – made worse apparently by immigrants (you wait until the Northerners arrive!)

– Key workers are not available (probably because they cannot afford to live in central London and cannot afford to travel into London)

– There are water shortages (which will probably get worse when the people from Hartlepool, Burnley, Hull Middlesbrough et al arrive)

Actually being unemployed and living on the Durham coast sounds like quite a good life in comparison – and will probably cost the exchequer less than solving all the additional problems London would have if you moved hundreds of thousands, if not millions of people from “dead” areas to London.”

 

 

Economist, 12 Oct 2013 http://www.economist.com/news/leaders/21587790-city-sicker