Steve Beasant

Payday lenders have agreed to improve their codes of practice to increase transparency and better protect vulnerable borrowers, Business Minister Norman Lamb announced today.

Following intensive discussions with the Government, the four Trade Associations representing over 90 per cent of the payday and short-term loan industry, have agreed to add to their Codes of Practice by 25 July 2012 to deliver better consumer protections.

The agreement comes as the Government responds to the BIS Select Committee’s Report into Debt Management and sets out further actions on payday loans, consumer credit regulation and debt management.

The commitments made by the industry on payday loans include:

• a good practice customer charter explaining how the loan works and the costs involved;
• a commitment to inform customers three days before money is withdrawn;
• increased transparency about loan repayment so that consumers can make informed decisions and are not surprised by hidden payments;
• more help for customers in financial difficulty by freezing charges and interest;
• robust credit and affordability assessments to ensure loans are suitable for the customer’s situation; and
• effective compliance monitoring by the Trade Associations to root out poor practice in the industry.

Business Minister Norman Lamb said:

“Today’s agreement by the payday lending industry is a step in the right direction and I welcome the commitment of the four Trade Associations to strengthen their codes of practice. The Government sees it as vital for the industry to deliver real enhanced consumer protections and to provide more clarity through a good practice customer charter.

“However I want to see further action– in particular, on the use of continuous payment authority. I expect the industry to respond effectively to any recommendations which emerge out of OFT’s investigations. I also want to make sure that the industry can self-regulate effectively to drive out rogue companies.

“Payday loans should only ever be used as a short-term financial stop-gap, not as a long-term solution to financial difficulties. I would urge people to think carefully before taking out a short term loan and to consider affordable alternatives such as their local Credit Union.”

The Department anticipates that the outcome of the OFT’s compliance report will also require the industry to deliver further measures to address consumer detriment identified in this market. The Government is also considering giving the OFT new powers to suspend credit licences with immediate effect and will provide an update on this shortly.

In line with the principles of freedom, fairness and responsibility, the Government’s response maintains the vision to empower consumers so that they have the right tools to make informed decisions for themselves and that they should be free to borrow if that is what they decide is in their best interests.

At the same time, there should be a safe and fair regulatory framework for credit and personal insolvency that protects vulnerable consumers, particularly those at risk of falling into financial difficulty, and which drives rogue companies out of the market.

The other commitments outlined in the Government’s response include a more detailed timetable and methodology on the transfer of consumer credit regulation from the OFT to the new Financial Conduct Authority.

On debt management, Norman Lamb will chair the initial industry-wide meeting on 14 June to discuss the feasibility of a Debt Management Plan Protocol. This aims to improve industry standards by ensuring that plans are sustainable and in the best interests of all parties, especially enabling consumers to compare providers.

The University of Bristol Personal Finance Research Centre has also provided an update, published today, on their ongoing research into the impact of a variable cap on the total cost of high cost credit, including the payday loans market. This was commissioned by the Government and will report back at the end of the summer.

The research team have completed a review of previous evidence against their research objectives as well as carrying out in-depth telephone interviews with five different high cost lender trade associations, 24 lenders and a consumer survey of 1,500 customers of payday loans, home credit and pawnbrokers.

The Government will continue to take a strong interest in this market and work with the regulators, consumer groups and industry representatives to ensure consumers are able to exercise choice and are properly protected.

Liberal Democrat MEP for London Sarah Ludford has welcomed a call by MEPs calling for a radical reduction in EU wasteful use of resources and a boost to competiveness through green growth.  

The resolution for a resource efficiency strategy calls for ways to achieve higher living standards with reduced environmental impact. Its proposals include stimulating the market in recyclable goods, product standards that foster durability, tougher reduction targets for use of land, water and materials and carbon footprint, progress towards banning waste landfill and stronger green procurement requirements.

Sarah Ludford commented:

“We are fast destroying our world, with 60% of the world’s ecosystems degraded. A dramatic culture change is needed to stop our wasteful gobbling up of resources while sustaining high levels of prosperity.”

“It’s a disgrace that 20% of food is disposed of as refuse, and essential that action is taken now to prevent it. Fine words have to be replaced with concrete actions.”

“This also makes economic sense: the transition towards a green economy is inevitable as resources become scarcer, and the EU must be ahead of the curve.”

Last week Liberal Democrat MP for East Dunbartonshire Jo Swinson joined forces with major UK charities including Cancer Research UK, British Red Cross, Barnardo’s, Oxfam and the British Heart Foundation – as well as hundreds of local hospices and smaller charities – in a drive to generate more donations for charity shops.

Jo Swinson supported the Choose Charity Shops campaign, led by the Charity Retail Association, by visiting Cancer Research UK shops in Kirkintilloch and Milngavie.

The Charity Retail Association has said that charity shop popularity is at an all time high. Charity shops now raise over £200 million every year for a huge range of charitable causes and they reduce the UK’s carbon emissions by 3.7 million tonnes every year through reusing items. They also support 180,000 volunteering opportunities and 17,000 jobs.

But charity shops thrive on donations of unwanted items from members of the public, and many are struggling to get enough through the door. This week nearly 6,000 charity shops in the UK are coming together to ask members of the public to make a donation to a charity shop in their area and pledge to donate to charity shops for the coming year. Events are taking place across the country to support the campaign.

Commenting Jo Swinson said:

“Donating to charity shops is a good excuse to do a little spring cleaning and make sure your clothes don’t end up in landfill while supporting the important work of valuable local and national charities.

“You can boost the value of your donated clothes even further by filling out a simple Gift Aid form.

“I would encourage local residents to look in their closets and cupboards and find an item they don’t wear or use donate to a great cause.”

There are nearly 6,000 shops participating in Choose Charity Shops. For further information on the campaign, the charities participating, or to find your local charity shop, visit www.choosecharityshops.org

The Choose Charity Shops campaign is led by the Charity Retail Association, the UK trade association for charity shops.

The Association represents over 80 per cent of charity shops in the UK. Please contact Wendy Mitchell wendy@charityretail.org.uk 020 7255 4483 for more information or to find out about where events are happening in your area.

Prime Minister, David Cameron has reassured Liberal Democrat MP for Cambridge Julian Huppert of the importance of science funding to the country’s future.

He acknowledged that the government’s science budget would have been an easy target for reductions and that money could have been spent on “politically more attractive things”.

But he added: “We decided to take the long-term view and to save the science budget because it is a key part of Britain’s future.”

Mr Cameron’s comments came during Prime Minister’s Questions in the House of Commons yesterday (Wednesday, May 23).

Julian Huppert told him: “Britain has an excellent track record in scientific research and development, despite historically low levels of funding. For this to continue, and to continue to drive so much economic growth, sustained funding is required. Can the Prime Minister assure me that this will be delivered in this Parliament and the next comprehensive spending review?”

Mr Cameron said: “Obviously, I cannot bind the hands of the next comprehensive spending review, but in this spending review we made an important decision to protect the science budget.”

Later Julian Huppert said: “It is clear from Mr Cameron’s response that this government recognises the importance of funding science and scientific research and this is extremely good news for those working in that field in Cambridge and the country as a whole.

“Britain is renowned for its excellence in the fields of scientific research and development; but we can only hold onto that global ranking and continue this work if the money is there to support it.

“This government has shown by its commitment to science in the last spending review and Mr Cameron’s comments that it values the excellent work being carried out and recognises the vital part it plays in this country’s future prosperity.”

Responding to Andrew Bailey, executive director of the Bank of England’s, comments on free banking today, Mike O’Connor, Chief Executive of Consumer Focus said: 

‘The fact that banking isn’t really free is one of our worst kept secrets. Most people pay indirectly either through penalties or lost interest, depending on whether they are in the red or the black. 

‘There would be real value in establishing a more open and honest relationship between banks and their customers on what they get, how much it costs and whether others are offering better value for money. What mustn’t happen is that consumers end up with the worst of both worlds – paying for accounts but still enduring unfair charges, opaque and complex products, mis-selling and poor customer service.’

Liberal Democrat European justice & human rights spokeswoman and London MEP Sarah Ludford is hopeful of strong cross-party support for a resolution in the European Parliament today against homophobia in Europe.

The resolution highlights laws in Eastern European countries such as Russia, Hungary, Lithuania and Latvia restricting public information about LGBT issues and the banning of Pride marches. It deplores hate speech, violence and murder against gay people.

The resolution calls on the European Commission and Member States to ensure that same sex couples enjoy EU free movement rights without discrimination.

Sarah Ludford, commented:

“It is absolutely shocking that blatant homophobia persists in EU countries as well as in the wider Europe, and that LGBT people are dying through hate crimes despite the professed commitment to European human rights standards. A culture of homophobic intolerance driven by fear has no place in modern Europe.

“While we look forward to World Pride in London, Riga’s Baltic Pride is threatened with cancellation and Budapest Pride only just survived an attempted police ban. Laws against homosexual ‘promotion’ or ‘propaganda’ interfere outrageously with free speech.”

“I look forward to strong support for this resolution from centre-right MEPs. Progress based on cross-party agreement can be rapid, as the UK has shown. We have a Tory Prime Minister who once backed ‘section 28′ and who now supports Lib Dem plans for equal marriage, helping make the UK top in Europe for LGBT human rights.”

In a new report Consumer Focus argues that credit union services should be expanded by offering them through the UK’s post office network. The watchdog’s research shows a third of consumers (34 per cent overall and 40 per cent of those on lower incomes) would be interested in joining a credit union, but two-thirds of these say they cannot because they do not think there is one nearby.

The report – Credit where credit’s due – argues that offering credit union services through the Post Office would significantly increase their potential to provide a long-term alternative to High Street banks, especially for people on low incomes. This could help plug a credit gap for low income consumers who turn to high interest, short-term loans, such as payday loans, as they can’t access affordable credit through banks. It could also provide low income consumers who do not always trust High Street banks, with transactional accounts offered through a trusted provider. This would allow many to benefit from cheaper goods and services only available online or by direct debit.

Some of the key findings revealed by Consumer Focus’s research include:

• 46 per cent of consumers said that the post office would be a convenient way for them to access credit union services. This increased to 57 per cent for the poorest social groups
   
• Almost half of consumers (46 per cent) said they would trust credit unions more if they were available at the Post Office, including more than half of those on low incomes.
   
• Four out of 10 low income consumers say they would be more likely to open a credit union account, or consider applying for a small loan, if they could do so at a Post Office
   
• Among those interested in opening a credit union account, and who want to be able to use the Post Office to do so, 49 per cent said the main reason was because the Post Office was local, and 35 per cent because of the trust they have in Post Offices.
   
• Only 19 per cent of those on low-to-middle incomes and 28 per cent of low income groups said they were fully satisfied with High Street banks and would therefore be unwilling to consider other options to them. 

Andy Burrows, Head of Post Offices at Consumer Focus, said: 

‘The Government has suggested that a million people on low incomes could benefit from greater access to banking and affordable credit. Credit unions would only be one part of this picture but our research shows Post office access would really allow credit unions to deliver on their potential. Credit unions could never afford a branch network in their own right so tying up with post offices is a logical step. 

‘Marrying credit unions and post offices creates a situation where everybody wins. Credit unions would benefit from greater access and awareness, customers would get more convenience and alternatives to high street banking, and it would also give a shot in the arm for the post office network. The Post Office brand is trusted and could help boost confidence in, and take-up of, credit union services.’ 

In the past decade credit unions in Britain have trebled their membership and there is considerable potential for further expansion. A recent study from the Department of Work and Pensions (DWP) also found that a market exists among people on lower incomes for locally provided banking, savings products and affordable loans. The study found that among low-income groups, 1.7 million do not have a transactional bank account, four million incur bank charges and up to seven million use sources of high cost credit. Other than credit unions, the DWP suggests that ‘realistic options’ to High Street banks are ‘limited.’ 

Consumer Focus argues that the Post Office offers significant benefits to increasing the role of credit unions by addressing many of the current barriers to their take-up. These include: 

• Trust - consumers (especially those on low incomes) trust and value the Post Office network when they very often do not feel comfortable, or may be unwilling, to use High Street banks for transactional accounts, saving products or loans.
    
• Geographical spread – post offices offers convenient access for consumers, many of whom are currently restricted from using credit unions due to limited access. The 11,800 Post Office network offers more branches than banks and building societies combined. The Association of British Credit Unions (ABCUL) estimates that in 2010, eight million adults were unable to access credit unions because of limited geographical coverage.
   
• Availability and convenience – post offices offer credit unions the chance to reach many more people – they are used by low income groups but also offer the awareness and availability to appeal to higher income consumers too. This would help secure the long-term sustainability of credit unions by providing a wider and more diverse customer base.
    
• Awareness – nationwide availability through Post Office would help address low consumer awareness of credit unions.