In a month when the FCA has been coming down hard on payday loan providers, the industry has been doing its best to improve its PR performance with a series of reports intended to enhance its battered authority by focusing on areas where improvements are needed.
One such report comes from short-term loan provider Peachy, which reports that one in every ten homeowners it has canvassed admits to struggling with its monthly outgoings. The 18 to 35 year old age group is the most vulnerable to running out of cash before the end of the month, the payday lender says. But rather shockingly, it adds, 67% of the people it interviewed have at best only a vague notion about what interest rates they are paying on their credit cards, overdrafts and loans. (Typical interest for a one-month £100 loan from Peachy comes to £34.)
Borrowing from family and friends is the most popular option when it comes to financial support, Peachy says, with a fifth of the population having resorted to this measure. Regionally, the most likely to dip into their savings are Londoners (40%). And people in Northern Ireland run out of money the quickest, with 70% declaring that they have no money left in their account by the time pay day comes around.
11% of the survey’s respondents, Peachy says, admit to being constantly within their overdraft range (or exceeding it). And 60% of people do not know their credit rating score.
Unsurprisingly, those earning under £10,000 a year were the most naive about their credit ratings, with 72% unaware of their personal scores – whereas 65% of household earning £100,000 or more were aware of their scores.
Universal Credit Crunch
So how will the poorer end of society manage next year, when the new universal credits system is due to change the pattern of benefits distribution, including housing benefit, from fortnightly to quarterly? Agencies like Shelter, the Citizens’ Advice Bureau and the housing associations are already cautioning the government that poorer consumers who are used to a weekly cash economy will struggle to conquer the principle of monthly budgeting – and that the likeliest result will be that payday loan demand will rise as rent arrears start to pile up.
That very fear, it seems, is already being confirmed in the four pilot schemes already in operation – all in Greater Manchester. But what’s doubly unfortunate is that the new arrangements will coincide with a new rule whereby housing association tenants will no longer have their housing benefit automatically sent to their landlords, but will receive it directly and mist then pay it on. It is hard to imagine that this can mean anything but trouble for landlords.