Cash-strapped tenants can make their situation worse by turning to loan sharks. Darren Reynolds explains why landlords have waded in to help tackle the problem
In today’s tough financial climate there is a big need for housing providers to develop a coordinated and targeted approach to tackling financial inclusion. Knowsley in Merseyside is one of the most deprived boroughs in the country, so it is of particular importance for us. Eighty-one per cent of Knowsley Housing Trust’s households are dependent on housing benefit. Local credit unions, which offer community savings and loans in the area, have identified a strong presence of high-interest home credit and illegal money lending on our doorstep.
The work we have done to stop this type of activity has contributed to a couple of high-profile convictions for illegal money lending, known as loan sharking. In one case, the North West Illegal Money Lending Team, which is part of Trading Standards North West and one of the organisations we work with to crack down on loan sharks, seized and removed a number of documents from illegal money lenders. They showed that this single operator had dished out illegal loans to 145 people, with annual percentage rates ranging from 886 per cent to a staggering 131,000 per cent interest.
Our partnership with the IMLT along with credit unions, the Citizens Advice, police, Merseyside Financial Inclusion Forum and Knowsley Council, and our staff members’ own hard work was credited in the Chartered Institute of Housing’s Improving financial inclusion and capability in social housing report for our work tackling loan sharks.
So what have we done? Over the past two years, KHT has dedicated around 25 per cent of the £3.6 million it has put into ‘corporate social responsibility investment’ - money spent working with third sector organisations to improve the lives of tenants - on addressing financial inclusion.
Since August 2009 we’ve undertaken outreach work on our estates, promoting our efforts to crack down on illegal money lenders. We have also set up our own confidential helpline for victims of loan sharks, which has resulted in five reports of activity which were sent on to the IMLT.
There are a number of ways our housing officers can pick up on illegal money lending activity. Our officers work through an income and expenditure form with tenants who have fallen into rent arrears. If during the completion of this form it transpires that the individual has a big outgoing in their list of debts, our housing officers have been trained to find out if they are in an informal borrowing arrangement. What’s more, if a tenant who is in arrears manages to pay off, for example, £3,000 in debts in one go, that should raise alarms. Often in this situation, the tenant will say they’ve borrowed money from a ‘friend’.
Finding a solution
Our staff members have been trained to promote alternatives to illegal money lending through grant support and promotion of credit unions. If people are not aware of the alternatives they will continue to use loan sharks.
The biggest challenge has been to build trust between KHT and tenants, encouraging them to come forward to provide information. We have negated this to some extent by providing the information to the IMLT on behalf of the tenant so they can remain anonymous.
While this means the IMLT does not get witness statements, it is still able to map the activity of loan sharks in our neighbourhoods. News of the availability of illegal loans spreads by word-of-mouth, so the lending is estate-based. A loan shark only needs for knowledge of their ‘services’ to spread throughout a few streets to get going.
We think that for social landlords to make financial inclusion projects work, they need to be embedded in the culture of the organisation.
The problem will not be resolved using ‘quick fix’ projects, it’s an ongoing battle which cannot be fought in isolation. Housing providers must work with other organisations to share intelligence and focus their resources.
Darren Reynolds is the social responsibility support coordinator at Knowsley Housing Trust
Need to Know: financial inclusion
- 39 per cent of tenants are of working age and claiming either jobseeker’s allowance or employment and support allowance
- 62 per cent of tenants claim housing benefit, paid to those on benefits or working but on a low income
- 15 per cent of unemployed households do not have a transactional bank account, contrasting with 2 per cent of those in full-time work
- 84 per cent of the Chartered Institute of Housing members and housing associations that completed a UK-wide financial inclusion survey in June 2009 said that they were experiencing increased demand from tenants for debt advice and counselling
Source: The Chartered Institute of Housing’s Improving financial inclusion and capability in social housing report, April 2011