Credit firms flourish at expense of people on low incomes, says report

Access to credit for those on low incomes
needs to be more clearly on the government agenda, according to a
report from Liverpool John Moores University.

Although the government has developed a range
of different strategies for regenerating inner cities and deprived
neighbourhoods, the very people they are aimed at still regularly
turn to alternative credit providers “with often harmful and
damaging social and personal consequences”.

The report criticises government for a lack of
recent policy development in the area, and concludes that “access
to credit needs to be recognised as a major issue in the lives of
people on low incomes”.

The report shows how families on low incomes
gain extra money to finance basic needs, such as furniture or
children’s clothing, from a “flourishing alternative lending market
encompassing everything from mail-order catalogues, home credit,
tontines (savings clubs) and as a last resort unlicensed money

“Finding the ready cash for a new washing
machine when the old one breaks down, or for new beds for the
children, is rarely an option,” says the report. “But neither is
getting a bank loan, using a credit card, opening a high street
store card account or running up an overdraft.”

It also recommends reform of consumer credit
legislation to bring about “greater truth, transparency and honesty
in the way money is lent to low income consumers”, as well as
increased access to the social fund – the government’s cash safety
net for welfare benefit claimants – and “strategic centralised
financial and technical assistance” to help strengthen credit

“This report provides further evidence that
credit unions need to be encouraged and invested in, as only
sustainable, accessible credit unions can tackle the problems of
high-interest debt and people’s lack of access to properly
regulated financial services,” said Shaun Spiers, chief executive
of the Association of British Credit Unions.

– Paul Jones, Liverpool John Moores
University, Access to Credit on a Low Income, available
from the Furniture Resource Centre, Liverpool, tel 0151 702 0550 or

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