New alliance to challenge high-cost credit providers

Actor and activist Michael Sheen has launched a group called the End High-Cost Credit Alliance, aimed at “tackling the increasing burden of household debt and, in particular, the exploitative credit lending practices targeted at those who can least afford it.”

Speaking at the Responsible Finance conference where the Alliance was launched, Mr Sheen said that high-cost credit is unfairly targeted at vulnerable people who can least afford it. 

“I firmly believe we need to view irresponsible lending as a matter of public health and unlock the expertise and resources in public health alongside that of frontline services providing fair finance,” Mr Sheen adds.

The Alliance will focus on five key areas of action:

  1. Alternatives. “To make credit fairer for all we seek to influence behaviour change in the flow of major capital to consider investing in fair providers of finance, instead of their high cost credit competitors.  We will back fair finance providers, equipping them with the resources to compete and win against high cost credit providers. We’ll do this with money, influence, policy, regulation and public support.”
  2. Public debate. “Improving credit for all starts by improving the credit and support options for those most in need but we haven’t yet won over the public.”
  3. Regulation, Policy and practice. “Presenting the economic and moral case for change in regulation, law and practice and doing so with the involvement of regulators, law makers and practitioners, informed by the general public, experts and fair credit providers.”
  4. The Wider Workforce. “Training workforces across our communities to ensure multiple points of support and signposting to advice and fair finance provision both within the local area and online.”
  5. Education. “We’ve gone backwards in the provision of financial literacy in schools and communities across the UK. We’ll work with partners to design and deliver a UK wide approach to school and community based financial education.”

The move has been welcomed by Responsible Finance Chief Executive Jennifer Tankard, however Morses Club, a home credit business with 229,000 customers and 2,050 agents across 98 UK locations, has warned that the restrictions could force people to turn to illegal loan sharks instead.

“The likely unintended consequence of restricting access to HCC [home consumer credit] lending will be that many individuals will be forced to turn to unregulated lenders charging punitive repayment terms, which will remove any ability to regulate or control consumer debt,” says Paul Smith, Chief Executive of Morses Club. 

Whilst Mr Smith welcomes a review and the call for greater transparency, he does however add: “We also call on parties on all sides of the debate to recognise the reality facing individuals who rely on the HCC sector today.

“Indeed, according to the England Illegal Money Lending Team (IMLT), it is estimated that 310,000 people are using illegal money lenders, which equates to a staggering three individuals for every 10 customers of regulated HCC firms.”

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