Glasgow residents from the Fair Banking for All Campaign have met with MPs to demand action on fair and affordable credit, as Glasgow households pay an estimated £4.1 million a year extra due to high-cost borrowing.
Local representatives from the campaign met with MPs Martin Rhodes, Patricia Ferguson, Maureen Burke, and John Grady, to share personal experiences of the broken credit system, and to ask for their support for a Fair Banking Act.
The meeting comes as the government has released its national Financial Inclusion Strategy, which campaigners say doesn’t go far enough in tackling the widespread issue of exclusion from affordable credit.
The campaign highlights how they are hearing stories like those in Glasgow across the UK. Residents on low incomes in the area covering the previous Hackney South & Shoreditch constituency pay the highest poverty premium in London (having to turn to high cost credit like payday loans with ultra-high interest rates), at over £1.3 million a year, while in Birmingham, residents in Ladywood pay more than £1.1 million a year. In Glasgow, residents pay an extra £4.1 million each year, with the highest poverty premium borne by Glasgow’s North East constituency at over £800,000 a year.
One person in the group told MPs about being refused a bank loan to replace a broken fridge needed for medication, forcing her friend to borrow on her behalf. Another, a single mum and carer, was denied a small loan to replace a broken bed:
“I’m sleeping badly, it’s uncomfortable, I’m sometimes in pain. I know people who haven’t been able to repair or replace basics like a washing machine. When there’s an unexpected cost like that you just need to get it sorted, but if you can’t get a small, affordable loan from a bank, you’re left with no good options, and that can quickly spiral into more debt and more stress. It’s not fair that so many people in our city are locked out of affordable credit.”
Across the UK, 3.2 million people have been declined credit in the past two years, and around 14 million people on low incomes pay extra costs for essentials, known as paying the ‘poverty premium’.
Campaigners say a proposed new law – the Fair Banking Act – would change that. The Fair Banking Act would mean that banks have to report on who they lend to, be given a rating for inclusion, and take action if it’s found that they are excluding people. Banks could improve their rating by partnering with credit unions or CDFIs to widen access to fair credit. These organisations are not-for-profit lenders who are able to take the time to better understand someone’s circumstances, and if appropriate offer small low-cost loans.
Chair of the meeting, and Glasgow resident, Zahida said:
“The meeting was about making sure the voices of people most affected by financial exclusion are heard. Our MPs listened carefully and showed real interest in working with us to make fair to affordable credit a reality. We’ll keep pushing until that happens.”
Sam Rex-Edwards from the Finance Innovation Lab, which coordinates the campaign said:
“Pretty much everyone needs to borrow money at some point in their lives, whether that’s because of an emergency before payday, or because they want to start or grow a business, but millions are locked out of the credit system and just can’t access affordable credit when they need to.
Affordable credit isn’t the solution to poverty, but it’s a lifeline for someone in a difficult situation, and it’s essential for many businesses to grow. The government’s recently published Financial Inclusion Strategy is a welcome step forward, but stops disappointingly short of measures which will tackle the true scale of the affordable credit crisis. Every day the poorest people are paying the most for credit – we urgently need a Fair Banking Act.”
Martin Rhodes MP for Glasgow North said:
“Fair access to affordable credit is vital for people’s financial stability, and for economic growth. I was pleased to meet with local campaigners from the Fair Banking for All Campaign, together with fellow MPs for Glasgow, and to hear first-hand how exclusion from credit affects people in the city.
I support the call for a mechanism to ensure banks partner with specialist community lenders like credit unions and CDFIs to expand access to affordable credit, and I’ll be writing to the Economic Secretary to the Treasury, Lucy Rigby to ask her to secure this for the long-term. This would prevent people needlessly paying a poverty premium for credit, and would enable businesses to start and grow both here in Glasgow and across the country.”
Sharon MacPherson, chief executive of Financial Inclusion for Scotland, added:
“A Fair Banking Act would help ensure everyone – not just those on higher incomes – have fair access to affordable credit and have financial resilience.”Supported by actor Michael Sheen, the Fair Banking For All Campaign is a national campaign calling on all MPs to support a Fair Banking Act.
For more information visit www.fairbankingforall.org.