Employer Salary Advance Schemes (ESAS) and loans provided with the security of 'first call' on wages are expanding. Whilst collecting repayments directly from pay helps reduce the cost of borrowing, there are concerns that the products could harm some customers. In this blog we urge providers to ensure advances and loans are affordable and for mechanisms to be put in place so financially distressed customers can easily request a suspension of payments. We also call for further research to be conducted into the impacts of the products.
In July, we reflected on new evidence looking at people’s experience of using illegal lenders. Today, we are publishing our secondary analysis of the FCA's Financial Lives Survey, 2020 highlighting how demographic factors and financial pressures combine to increase the risk of borrowing from loan sharks. We find that having borrowed from legal high-cost lenders in the past 12 months greatly increases this risk and call for direct measures to counter cost-of-living pressures as the means to counter it.
Today’s announcement that the energy price cap is to rise by 80%, risks a 'Winter of Despair' for low to middle income households. Radical action is now needed to hold down prices, and protect those with prepayment meters in their homes.
As the cost-of-living crisis deepens, Executive Director, Damon Gibbons, questions whether credit expansion to households is part of the solution, or whether it would be better to extend help to service providers in return for commitments to keep prices down.