Housing groups to tackle payday loans
Housing groups are planning to do more to help vulnerable tenants with their finances in the wake of an increase in the number of people taking out payday loans.
The Chartered Institute of Housing has expressed concern that more tenants will need to access forms of credit in order to pay bills due to the implications of welfare reform and changes to housing benefit entitlements.
In the run-up to Christmas, taking out payday loans is becoming a reality for many people.
A report this week by insolvency trade body R3 has found that 3.5 million adults are considering taking out a pay day loan in the next six months.
Of those sampled who had taken a payday loan, 60 per cent regretted the decision and 48 per cent believed that the loan actually worsened their financial situation. Thirteen per cent believed their payday loan had a positive impact on their finances.
A spokesperson for the CIH said: ‘Payday loans can only ever be a short term solution usually placing the tenant in more difficulty due to interest
‘Housing providers are aware that many of their residents can resort to this type of expensive credit to tide them over and are keen to support their residents and tenants avoid the pitfalls of expensive credit and manage their money effectively.
‘However we do believe more could be done to regulate the sector in order to provide safe, secure access to affordable credit for tenants. Action to ensure debt advice, alternative forms of credit are available and advertised to tenants should be further encouraged by housing providers, government and the financial services industry.’
Laura Bostock, financial inclusion manager at Riverside agreed. She said: ‘We advise tenants to avoid pay-day lenders. We work closely with credit unions, which offer community savings plans to prepare for Christmas expenses. We also recommend community development finance institutions for low cost instant loans.’
Alongside Riverside’s existing welfare benefits and debt advisors they are planning to introduce a new service next year to help particularly vulnerable tenants. Using data to seek out tenants who are experiencing financial difficulties, Riverside will contact them with advice.
Ms Bostock said: ‘The aim is to contact those in trouble in order to intervene early, rather than wait for them to come to us when financial problems are often deeply entrenched.’