From the BBC:
A new not-for-profit lending scheme is being unveiled aimed at giving manageable loans to financially excluded people. A pilot scheme has been set up in the West Midlands called My Home Finance, in the hope of diverting people away from borrowing from loan sharks. However, the interest being charged is higher than the maximum by law that credit unions can charge. It will charge 29.9% APR in the pilot scheme, rising to 49.9% APR in April...
My Home Finance has been set up by the National Housing Federation (NHF), with 10 branches opening as part of the pilot project... The pilot scheme is being launched by Work and Pensions Secretary Iain Duncan Smith on Thursday. The "vast majority" of the set-up costs for the scheme have been met by the Department for Work and Pensions, according to the NHF. There has also been input from local housing associations and the Royal Bank of Scotland.
Please note that all of the parties involved are branches of government or are controlled by the government and financed by the taxpayer - the National Housing Federation is just the umbrella lobbying body for Housing Associations, who are in turn creatures of legislation and financed by the taxpayer (whether they do a better or worse job at providing 'affordable' housing than local councils is a separate issue), and this whole concept of 'living within your means' appears to have been lost in the mists of time.
Thursday, 23 September 2010
The New Feudalism (2)
Subscribe to:
Post Comments (Atom)
9 comments:
Have I got this right?
“financially excluded” = low/non-existent income, couldn’t afford to repay a loan at 30% or less from credit union who obviously won’t risk their members’ money.
Regular commercial lenders at much lower % won’t even consider them.
They will be given loans at 50% interest?
Truly, the management of the asylum has changed hands
Our loan sharks are better than your loan sharks, they're 'approved'.
That's the worst thing about social housing. Once you're in it, thousands of doo-gooders want to 'interface' with you.
VFTS, that is a fair and accurate summary.
Ch, yup.
SL, I've nothing against social housing in principle, but if somebody can afford to pay 49.9% interest on a loan, then wouldn't they be able to pay slightly higher rent?
APR isn't a very good way of comparing these short term loans.
They are designed for thick people who are incapable of keeping £500 in the bank in case they need a new washing machine, widescreen TV, get invited to Tenerife etc.
The provi ones are a few hundred per cent, but you only pay £800 or so back on £500 over the course of a year.
Pawnbrokers are the biggest con merchants, they charge as much as £200 interest on a £500 loan for 3 months secured on £800's worth of gold bullion!
I agree with Steven_L. The BBC made a complete hash of reporting this on the news this morning, saying that the APR at 29.9% is higher than a credit card but much lower than the 2000% known to be charged by doorstep lenders and "loan sharks".
APR comparisons are all very well, but only if you're comparing like with like. Reputable doorstep lenders - Provident and the like - provide a valuable service for a small part of the community and it's not their fault that the Consumer Credit Act requires them to use a calculation for small, very short-term loans that's designed to allow comparison between medium-to-long term credit. As usual, the people who drafted the legislation were way out of touch with the way some folk may have to structure their finances.
"Payday loans" are the most easily-found examples of high APRs - plenty of ads on TV with APRs of >2500%. If you've got a loan of say £200 for 2 weeks and there's a £30 broker / loan fee, you're going to see a real distortion in that ever-so-clever calculation.
I sometimes wonder if politicians wouldn't be happier seeing the poorest who need money in an emergency go back to Vinnie and his pals who keep a baseball bat in the car. That way they could claim to have saved the poorest in society from themselves, and ignore the real problem - which of course is what they like.
"Not for profit" eh? My prediction: the new scheme will be less efficient than commercial providers and will therefore end up charging higher rates than they do, even with their profits added.
maybe Iain should be concentrating his resources on that little welfare reform thingy instead!
AC, they'll cook the books to make it look like it has broken even by 'bidding' for 'pots' of money from other budgets, seconding people etc.
SL, I have every sympathy with people whose washing machine breaks down (those launderettes are hideously expensive), but in a responsible world, the dole office would advance them £150 for a second hand one and dock them £15 a week from their dole for the next ten weeks or something.
B, I don't think we are talking 'pay day' loans here, as the intended borrowers probably don't earn any wages. But fair point.
AC, 'not for profit' is the new word for 'loss making from the onset', perhaps. Agreed that IDS has bigger fish to fry.
Post a Comment