A snapshot survey of low paid members by UNISON, the UK’s largest union, found that one in five had been turned down for a loan or overdraft in the past two years. The union is warning that the reluctance of banks to lend to low paid workers has fuelled a growing reliance on payday lenders with 21% saying that they are very, or fairly, likely to take out a payday loan in the next six months.
The union is today launching a network of credit unions with the aim of helping members regain control of their finances. The launch is in response to a massive increase in the number of UNISON members contacting the union’s charity ‘There for You’ for help with spiralling levels of debt.
The union is also planning to use its relationship with employers to put in place payroll deduction schemes to help people save.
UNISON General Secretary Dave Prentis, said:
“The Government is doing nothing to help people struggling under the weight of massive personal debt. Their pay freeze coupled with cuts to public services and jobs has fuelled the rise in personal debt amongst our members.
“Banks are turning their backs on low paid workers pushing them into the arms of unscrupulous payday lenders. That is why we are setting up this network of credit unions with the aim of providing a safety net for members. We want to drive sky-high interest rates off the high street with a cap on the amount of interest that lenders are allowed to charge.”
The survey revealed that nearly 70% of low paid members are worried about their level of debt which typically stems from:
credit cards – 45%
overdrafts – 31%
payday or other short term high interest loans -13%
loans from friends and family – 15%
Nearly 20% of members seeking help from the union’s charity ‘There for You’ has taken out a payday loan or other short term high interest loan because of lack of access to credit from their bank or building society.
‘Fair deal’
UNISON’s five point programme for tackling debt and taking on payday lenders
1 Extend opportunities for affordable borrowing, budgetary and debt advice, including for the low paid
– Establish a network of credit unions as an extension of our ‘There for You’ budget advice, debt line and welfare provision
– Work with the credit union movement to push for a level playing field between payday lenders and credit unions. This includes calling on the Financial Conduct Authority (FCA) to investigate investment by mainstream banks and pension funds in payday lending companies, and look at how measures can be developed to increase investment in credit unions
2 Call on government to organise a major social investment programme, to provide people with debt problems an opportunity to reschedule their payday loans and start to save
– Write to the Treasury, Department for Work and Pensions and the Department for Business, Innovation and Skills urging them to undertake urgent work in this area
3 Campaign for measures to tackle the excesses of payday lending
– Call on the FCA to impose requirements on use of real time database (financed through a levy on lenders) by payday lenders to prevent irresponsible lending
– Call for a cap on interest that lenders can charge
– Work nationally and with local campaigners to restrict advertising by payday lenders
4 Use our relationship with employers to put in place payroll deduction schemes to help people save
– Identify existing good practice
– Seek to establish a joint employer body to develop plans to extend opportunities to all workplaces and to cover all income groups in the sectors that we organise
5 Negotiate and campaign for fairer pay
– People can’t save if they do not earn enough. It also makes them more reliant on credit for the wrong things (paying domestic bills etc.). The squeeze on pay and incomes – and the subsequent reliance by many on credit to supplement their incomes has undoubtedly been a major contributory factor in creating the economic chaos of recent years. A priority for us will be to push for higher pay for all our members.
Notes for Editors
The ten biggest payday lenders have a total turnover of nearly £800m – up from £313m just three years ago.
The number of people being paid below the living wage is now 4.8m (20% of the workforce).