Executive must do more to tackle the epidemic of payday and illegal lending
NICVA’s Centre for Economic Empowerment has commissioned a review of expensive lending in Northern Ireland, both legal and illegal. The report found that both types of expensive lending are having negative impacts on individuals and local communities. They have urged the Northern Ireland Executive to do more to tackle the negative aspects of payday and illegal lending.
These issues were discussed at a roundtable event on Wednesday 22 May, to launch the report. The roundtable reflected a good cross section of Government and civil society with local politicians, Government Departments, Credit Unions, academics and voluntary and community groups in attendance. NICVA intends to use the learning from the report and event to develop practical steps to improve the options available to people who have limited alternatives to engaging with payday and illegal lenders.
We asked Seamus McAleavey to explain why NICVA is looking into this issue, what impact it has on the community and what can be done about it.
Seamus McAleavey, NICVA Chief Executive said, “Our review found that it is too easy for people to get into debt with a number of lenders. We saw many cases where a relatively small initial loan spiralled into a debt of thousands of pounds. Ironically it seems that many people’s financial situations actually worsen as a result of using payday loans.
“These loans are being taken out by people on low incomes who are in work, as well as people who are not in work. They are using the money to make ends meet and pay for essential items such as utility bills and school uniforms.”
He added, “More worryingly, our review found paramilitary involvement in illegal money lending, mostly in working class communities. Our politicians and police need to take a much more open and robust approach to dealing with this criminal activity.
“We need to look at the multi-agency approach used in Great Britain, where police and Trading Standards work together to remove illegal lenders from the communities they are preying on and to support victims of illegal lending in accessing debt advice and rebuilding their finances.”
The review found that for those individuals who find themselves with problem debt, the experience is traumatic and extremely stressful. Those experiencing problem debt reported both personal and familial costs, including depression and suicidal thoughts, and that within families the greatest concern is the impact debt has on children.
Voluntary and community organisations such as FASA, Christians Against Poverty and advice centres across NI are at the forefront of providing advice and support to people with payday loans, often negotiating on their behalf with the lenders.
One adviser told researchers, “In one case I was able to negotiate with a client’s other (legal) creditors to accept token payments until the client repaid the illegal lenders. The credit card companies involved agreed to this when I explained that there was a threat of violence to the person.”
Payday loan borrowers take out an average of 3.5 loans a year. The average size of a payday loan is an estimated £294 and an estimated two thirds of payday loan borrowers have a household income of less than £25,000.
The report, available for download below, was commissioned by the Centre for Economic Empowerment and was carried out by NICVA Research and Advice NI.
UTV's online coverage of the report has received a number of comments.
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