Five years ago, I was sitting in the living room of a young family in Stockton-on-Tees. There was a large television in the corner, turned off, and the children were watching a portable television on a chair in front of it. When I asked “What’s the matter with the big telly?”, the dad tapped his pockets and, shrugging, said “No money.”
At the time, Thrive Teesside was working with Oxfam UK’s Poverty Programme. That was how we discovered the extent of the usage by Stockton’s low-income households of high-cost credit options.
Many people pay for their goods, essential or otherwise, on a ‘rent-to-own’ (RTO) basis. We were able to run a successful campaign, ‘Rip-off TV’, which challenged some of the lenders’ practices and improved the way they operate in our communities – hopefully helping them to offer a better deal to their customer base. The process was supported by the three biggest RTO companies, Friends Provident Foundation, the Centre for Responsible Credit, and a number of partner organisations including Consumer Focus, National Citizens’ Advice Bureaux and the Credit Reference Agencies (CRAs).
In keeping with the principles of Thrive, Church Action on Poverty and community organising, local people with direct experience of the issues were at the centre of the action.
Never do for others what they can do for themselves.
They discerned the issues, helped with the production of a ‘spoof’ advert, and took part in roundtable meetings in London with the RTO companies. Amongst all the jargon of data-sharing and reciprocity, the most poignant and important points at the meetings were made by the actual customers reflecting on the reality of their experience.
In the process, after initially challenging the companies, the organisation and its leaders were able to build a relationship with them around shared self-interest. We both wanted the same thing: a better deal for the customers.This also, and somewhat inevitably, led on to a discussion of the wider high-cost credit market, and how it might better serve the companies and their customers.
The issue was to improve the use of credit data. Companies were interested in assessing risk so that they could offer a better deal to customers. At the moment, people in the high-cost credit sector are what one of the data sharing experts at our meetings called ‘thin file customers’. It’s hard for companies to assess their credit-worthiness, and they would like to share customer data so they can make a better assessment . We agree with this in principle, as long as customers are not further marginalised, with the companies cherry-picking those they would deem more lucrative.
Secondly, at Thrive we have become increasingly aware of the problem of over-indebtedness amongst low-income households. This became apparent in our recent Money Pathways project, supported by the Northern Rock Foundation and in partnership with Durham University. In some instances, our money mentors came across households where people had been paying out 75% of their income on high-cost credit payments. It can easily be argued that, for whatever reason, this is irresponsible borrowing. However, we think that the burden of responsibility should shift back to the companies a little, so that they don’t commit people to payments which will leave them living in absolute poverty. There is a big role for the companies and CRAs to play in this.
Data-sharing and affordability will be central to Church Action on Poverty and Thrive’s campaigning in the coming months, so watch this space!
In September we will launch a new publication and campaign action targeting these high-cost lenders. Help us to stop the legal loan sharks and ensure that people on low incomes pay Fair Prices for credit.
This work is part of our ‘Food, Fuel, Finance’ programme, tackling the ‘Poverty Premium’ paid by people on low incomes for everyday goods and services.