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Durham University study warns credit firms off low income households Durham

A Durham University-led research project suggests high cost credit companies are made to adopt a charter to ensure they cannot lend ot people who are not able to afford their loans.

The study into debt in part of Teesside was conducted over two years and involved 24 low income households who had been experiencing unmanageable debt levels and commonly endured interest rates of 4,000%.

Professor Sarah Banks, co-director of the University’s Centre for Social Justice and Community Action (CSJCA), said: “Among the families we have been working with, high cost credit is commonplace and regarded as normal. There was low awareness of the huge interest rates and, instead, a simplistic focus on the weekly repayments rather than the total cost of this credit.

“We believe it is essential that high cost credit companies are made to adopt a charter to ensure that they cannot lend to people who are not able to afford these loans. We are recommending new regulations for data-sharing to ensure affordability, as well as a legal cap on the total cost of credit.

“Although supposedly for short-term use, in practice extremely high interest rates could last for months and Annual Percentage Rates of 4,000 per cent were common.”

“We have also concluded that the problem could be further tackled by encouraging credit unions and other community-based low cost lenders and we will continue to work with these bodies.

“Local debt advice and mentoring programmes will also be very beneficial.”

Greg Brown, Community Organiser at Thrive Teesside added: “With Durham University, we have pioneered a system of mentoring for these families to stimulate and support behavioural change by them, but also to encourage policy changes by lenders. There will be ongoing research to assess its effectiveness, though signs so far have been encouraging.

“We aim to use what we have learnt to benefit other agencies and families.”

The findings of ‘Debt On Teesside’ - a partnership between the Centre for Social Justice and Community Action and the Thrive Teesside community organisation - will present its findings at Durham University on Monday October 21.

Damon Gibbons, the director of London-based Centre for Responsible Credit will speak at the event.

This was posted in Bdaily's Members' News section by Tom Keighley .