Protecting the most vulnerable - the poverty premium and mitigating the impact of welfare reforms

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1 Social Inclusion Process Bulletin Issue 8: January 2014 Welcome to the Social Inclusion Process Bulletin. This issue focuses on the Birmingham Fair Money Campaign, a collaboration between Birmingham s credit unions and community development financial institutions (CDFIs), to raise the profile of affordable alternatives to the growing number of high cost lenders operating in the city. Protecting the most vulnerable - the poverty premium and mitigating the impact of welfare reforms A 2010 study by the Joseph Rowntree Foundation, Credit and Debit in Low Income Families, examined the experiences of credit and debit for families on low incomes over a 12 month period. Against the backdrop of the global credit crunch, with recession, increasing unemployment and rising household costs, the study looked at types of debt, triggers for debt and how people coped. According to the report, lack of access to ethical and affordable financial services costs households an estimated 10 per cent of their income. In Birmingham, as many as 40 per cent of the adult population are not successfully paying utility bills by direct debit, are in arrears with essential bills or are using higher cost credit. This is commonly known as the poverty premium. One of the commitments made in the Social Inclusion Process White Paper Making Birmingham an Inclusive City is to protect the most vulnerable. The White Paper states: Without the basic means for living it is impossible for the most vulnerable society to begin to engage in the social and economic life of the city. Evidence shows that welfare reforms will have a disproportionate impact on the most vulnerable in society and therefore concerted

2 and coordinated action is needed to mitigate against the worst effects. To underpin this commitment, the White Paper includes a recommendation that agencies in the city agree and implement a multi-agency approach to support people in crisis. Birmingham Fair Money Campaign The Birmingham Fair Money campaign was launched in September 2013, bringing together the not for profit lenders in the city to provide residents with access to affordable, ethical and responsible lending and to offer them an alternative to the high cost loan sector. Since its launch, the Birmingham Fair Money campaign has: Created an umbrella brand and agreement to use this by the six affordable credit providers in the city Set up the Birmingham Fair Money website to promote the brand and route enquiries from the public to the affordable financial provider most appropriate to meet their needs Worked with the media and a range of supporting organisations including Birmingham City Council to raise awareness of the campaign and provide access to ancillary services such as debt and welfare benefits advice With funding from the Illegal Money Lending Team secured through the city council, run the loans pop up shop in the city centre of Birmingham in the weeks leading to Christmas Developed the Birmingham Fair Money Manifesto with Birmingham City Council which now provides a strong basis on which to develop further initiatives Creation of the brand Birmingham Fair Money is a project originated and led by Citysave Credit Union. Development began in early 2013 and by the end of the year, six organisations (three credit 2

3 unions and three CDFIs) had agreed to work together under the Birmingham Fair Money umbrella brand: Citysave Credit Union Moneyline Advance Credit Union StreetUK Circul8 My Home Finance These organisations, acting individually, have relatively low public profiles in the city. The development of a common brand was felt to be an important first step to improve public awareness of the alternatives to high costs lending in the city, with the overall aim of disrupting the expansion of high costs credit in Birmingham. Since the launch of the Fair Money brand in September 2013 there have been over 1500 visits to the website in the period to 20 December Pop up loans shop From 1 October to 20 December 2013 the Fair Money Campaign ran a pop up loans shop from a portacabin in the High Street in Birmingham city centre an area that is heavily populated by high cost lenders, with 14 loans providers, pawnbrokers, logbook loans companies and weekly payment stores located with 100 yards of the cabin. The portacabin itself was funded by the Illegal Money Lending Team, with core staffing provided by Citysave, as well as significant support from a broad partnership of local and national agencies, including Moneyline, Street UK, Cavell Nurses Trust, Turn2Us, Stepchange, Unison, Unity Trust, Aston University, NatWest, Age Concern and Shelter. The delivery of services from the pop up shop resulted in over 1300 visits and provided a wealth of information concerning the problems experienced by users of high cost lenders in the city, with many borrowers trapped in a 3

4 cycle of repeat borrowing and going without essential items such as groceries and heating because of their indebtedness and the very high cost of servicing their loans. The volume of visitors to the cabin reporting that they had first taken a high cost loan to pay household bills resulted in a mini campaign called Don t Borrow to Pay your Bills Week, with relevant agencies being brought in to help to provide better solutions for those struggling with arrears on key bills, such as Severn Trent Water and Pay Ahead Stay Ahead. Cabin staff took evidence of numerous breaches of current legislation by lenders which helped to inform a response to the FCA s consultation on future consumer credit regulation. A dossier of specific complaints is being compiled which will be submitted to the regulators with a request that enforcement action be taken. Birmingham City Council Fair Money Manifesto The Fair Money campaign has received strong support from Birmingham City Council, with Cllr John Cotton, cabinet member for social inclusion and equalities, leading this issue. The city council published its Fair Money Manifesto in December 2013, setting out four clear commitments to challenging high cost loans, helping people to tackle unaffordable debt and to ensure that Birmingham residents are able to access fairly priced and ethical financial services. These are to: 1. Call for better regulation of high cost lenders 2. Support the expansion of credit unions and responsible lending 3. Engage with banks so that they widen their services to residents 4. Seek powers that would allow the council to manage the growth and operation of high cost lenders in neighbourhoods Proposals for future development of Birmingham Fair Money Findings from the project so far have identified a clear and compelling case to increase the operating capacity 4

5 of affordable lenders in Birmingham. In line with the commitments made by Birmingham City Council in its Fair Money Manifesto, specific proposals for the future are to: Develop niche and fit-for-purpose lending services including an alternative to expensive rent-to-own stores Improve bill payment and collection services for social landlords, utility providers and Council Tax Establish an effective dialogue with banks to increase the operational capacity of affordable credit providers in the city Sustain the Birmingham Fair Money brand and website, including identification of funding for its development Lobby for a more supportive regulatory framework for credit unions in the city More information If you would like to find out more about the Birmingham Fair Money campaign, go to or Angela Clements, chief executive officer of Citysave Credit Union, on ceo@citysave.org.uk. For information about the Birmingham Social Inclusion Process including the White Paper, Making Birmingham an Inclusive City, contact the Challenge Unit by to fairbrum@birmingham.gov.uk, telephone , follow us on #fairbrum or visit the Fairbrum blog at Jackie Mould Director of Strategic Partnerships, Challenge Unit 5