//Fair for You is making a real difference to people’s lives

Fair for You is making a real difference to people’s lives

537854337The Centre for Responsible Credit (‘CfRC’) has today (Monday, 12th September) published new research into the social impacts of not for profit lender Fair for You, which is providing low income households with an affordable and flexible alternative to the high cost rent to own lenders, including BrightHouse.

Key findings

  • Fair for You is much cheaper than rent-to-own but that’s not all…Customers using Fair for You will typically save over £500 per item, but Fair for You also provides an excellent service.  95% of customers rate it either excellent or very good.  Customers particularly like the flexibility of the loan product, including the fact that they can set their own loan duration, can choose how often they pay (weekly, fortnightly, 4 weekly or monthly) and can over-pay or take payment holidays when needed;
  • The savings that Fair for You customers are making are vital to their financial well-being.  Half of all customers say that borrowing from Fair for You has made it much easier to cope with the day to day costs of running the household.  Over one third (38%) report that it has significantly helped them to manage their money and build up regular savings, and over a quarter (28%) of customers are now a lot better able to pay their rent, mortgage, or other household bills as a result of their Fair for You loan.

In addition to these direct financial benefits, a third of customers reported that levels of stress, anxiety and depression had reduced a lot, and over a quarter were much better able to eat healthily, cope with their physical health conditions or disabilities, or reported improvements in their child’s well-being. Around one fifth of customers reported that using Fair for You had also helped to improve relationships within their family.

Commenting on the findings, CfRC Director, Damon Gibbons, said:

Fair for You is making a real difference to its customer’s lives. Today, we are calling on local authorities, social housing landlords, utility companies and the voluntary sector to support Fair for You’s challenge to the high cost lenders and to actively promote it to their service users. Together, we can, at last, offer a positive, national, alternative to the high cost credit rip off that has existed in this country for far too long.”

Need for the FCA to act against high cost lenders

Whilst extremely positive about Fair for You’s service, our research also found that high cost lenders are systematically mis-reporting the credit payment histories of many low income borrowers. This is preventing Fair for You from providing these applicants with a chance to escape from the high cost lending market.

The CfRC is writing to Andrew Bailey, Chief Executive at the Financial Conduct Authority, to urge him to initiate an urgent review of credit reporting practices in the sector, and we will be talking to MPs to raise this issue in Parliament.

Chief Executive of Fair for You, Angela Clements, said

“Too many lenders in this market are overly expensive, inflexible, and penalise low income borrowers.   We are different.  We are not just cheaper, we treat our customers with respect and deliver a top quality service.  But we are being hampered in our ambition to deliver an alternative by widespread credit misreporting by high cost lenders.  If it really wants to see people on lower incomes provided with decent credit options then the Financial Conduct Authority has to get involved, and quickly.”

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By | 2016-12-15T13:35:34+00:00 September 12th, 2016|Blog|2 Comments

About the Author:

Damon Gibbons
Damon is the Director of the Centre for Responsible Credit.

2 Comments

  1. Paul Rickard September 13, 2016 at 2:35 pm - Reply

    There is no doubt that Fair For You is a substantially superior option to the likes of Brighthouse but this does not really set the bar very high. With personal debt spiraling out of control, the reality for most families on low incomes is that many forms of credit are likely to be increasingly unmanageable, especially loans at 42.6% APR.

    Although rejection of the aggressive selling and debt recovery tactics employed by the Rent to Own and Doorstep/Payday loan sectors will make a welcome difference to FFY customers, many would be better advised to consider other options before taking out a loan of this type.

    The relatively high proportion of vulnerable clients in the reported data such as lone parents or those with long-term illnesses may be a priority for council-run Local Welfare Schemes. As we know, some of these have been a disappointment but many still function effectively and should be the first port of call where clients meet the eligibility criteria. For those on regular benefits (half of the FFY client base apparently) the DWP still has a duty to dispense Budgeting Loans. These were designed for the very purpose of ensuring those reliant on welfare payments do not go without basic household items and are repayable at 0% interest over two years!

    Finally, the notion of lobbying the Money Advice Service to allow greater flexibility for those on debt management plans to take on further loans seems particularly misplaced. A lot of these people would be better advised to borrow the money for a Debt Relief Order, which is easy for those without substantial assets to apply for and would remove the bulk of their debts in one fell swoop.

    These options are not relevant to everyone but it is incumbent on those in the community and not-for-profit sector to ensure they are explored before promoting further costly debt.

    • Damon Gibbons
      Damon Gibbons September 27, 2016 at 9:11 am - Reply

      Thanks for these comments Paul. I understand the concern about people using any form of credit when their incomes are very low, and agree that grants would often be more appropriate – if they were available.

      However, since the abolition of the Social Fund and the localisation of welfare schemes grants have been increasingly difficult to come by. We have published two reports on local welfare schemes in recent years (both of which found that provision has been substantially curtailed) and we are working on a third report – the research for which indicates that some schemes have been abolished altogether. Even where provision has been retained the procedures for accessing support are often extremely bureaucratic – which is simply no good for people who have an urgent need to obtain essential items. The bureaucracy involved in local schemes is part of the reason that people go to rent to own stores rather than apply for a grant. Similar problems exist with the application process for Budgeting Loans, and the period of time that these have to be repaid over has been reduced – which increases the amount of the regular repayment – something which is incredibly important to people on low incomes. In fact, we found that Government expenditure on Budgeting Loans had fallen significantly in recent years, so they are clearly not the answer in their current form.

      In this context, Fair for You does offer an extremely good alternative to some people on benefits. We found that the weekly repayments were affordable and that its processes were quick and the customer service was rated as excellent. The overall cost savings compared with rent to own stores are huge. And it is capable of being promoted on a national basis, which means that it has the potential to really disrupt the high cost credit market – which to be frank local welfare schemes do not.

      Of course, that does not mean that CfRC is not involved in campaigning for more grant funding for low income households. Our forthcoming report will make that perfectly clear, and Fair for You has to turn down a considerable proportion of applicants for whom credit is not a solution to their problems. When it does so, it routes people to sources fo advice and assistance – including help with applications to local welfare schemes where these still exist.

      Finally, whilst agreeing that some people could access a Debt Relief Order – this is not available to many. The eligibility criteria is restrictive (particularly the fact that anyone with a disposable income of more than £50 per month is not able to obtain one). Many low income households therefore find themselves on debt management plans and are unable to fund the purchase of essential items whilst this is the case. We think a review of how these people are expected to deal with emergencies such as a cooker breaking down is long overdue.

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