Breaking News Swansea Credit Union first scheme in Wales

Swansea Council’s Housing Service and the city’s Credit Union are joining forces in a new scheme to help new Council tenants manage their money. The scheme will offer a range of accounts to support new tenants and those on low incomes in preparation for some of the major changes to benefits being introduced this year.

From April 2013, over 2000 local authority tenants in Swansea will now have their Housing Benefit reduced if they have one or more spare bedrooms. These tenants will now have to pay the shortfall.

Swansea’s Credit Union LASA (Loans and Savings Abertawe) will offer to help families manage their money and to pay their rent or bills promptly in a bid to prevent people falling into financial difficulties

David Phillips the Leader of Swansea Council is also the Cabinet Member for Anti-Poverty at Swansea Council. He said:

“We already know the changes to the Social Security system being introduced by the UK Government will have an impact on thousands of Swansea families and this is one way that we can help people manage on a reduced income.

 “As a Council we are committed to helping tackle debt, which very quickly traps people who may be experiencing financial hardship. Credit Unions are cooperatives, which means they will offer balanced financial advice and won’t charge high interest rates.”

This scheme will help tenants who are affected by the changes to prioritise their essential payments like rent. It works by providing a rent account, a savings account and a budgeting account. After the tenant has paid into these accounts the Credit Union will make direct rent payments on their behalf on the due date. A pre-paid card will then be credited with money that is left over and can be used like a debit card.

The benefits of this scheme are that there are no bank charges, along with the re-assurance that essential bills are paid. Tenants who join the scheme will also have access to all the other services provided by the Credit Union, such as savings schemes and affordable loans.

More details on the scheme are available either by contacting Swansea Credit Union LASA on 01792 643632  email: query@lasacreditunion.org.uk   www.lasacreditunion.org.uk  or  contact the Rents Team on 01792 534094

The announcement that the government is looking at Payday Loans is great news.

The OFT is giving the leading 50 payday lenders, accounting for 90 per cent of the payday market, 12 weeks to change their business practices or risk losing their licences, after it uncovered evidence of widespread irresponsible lending and failure to comply with the standards required of them.

The OFT has also today announced that, subject to consultation, it proposes to refer the payday lending market to the Competition Commission after it found evidence of deep-rooted problems in how lenders compete with each other. The action was announced in the final report on the OFT's compliance review of the £2 billion payday lending sector. The review found evidence of problems throughout the lifecycle of payday loans, from advertising to debt collection, and across the sector, including by leading lenders that are members of established trade associations.

Particular areas of non-compliance included:

• lenders failing to conduct adequate assessments of affordability before lending or before rolling over loans
• failing to explain adequately how payments will be collected
• using aggressive debt collection practices
• not treating borrowers in financial difficulty with forbearance.

The fifty leading lenders, each of which was inspected, will have to take rapid action to address the specific concerns the OFT identified with each of their businesses. They must demonstrate within 12 weeks that they are fully compliant, or risk losing their licence. Failure to cooperate with this process will trigger enforcement action. Payday lending is a top enforcement priority for the OFT. Customers often have limited alternative sources of credit and are frequently in a vulnerable financial position. Combined with this, the high rates of interest charged by many payday lenders can make the consequences of irresponsible lending particularly acute. 

The OFT has also uncovered evidence suggesting that this market is not working well in other respects and that irresponsible lending in the sector may have its roots in the way competition works. Lenders were found to compete by emphasising the speed and easy access to loans rather than the price and also to be relying too heavily on rolling over or refinancing loans. The OFT believes that both these factors distort lenders' incentives to carry out proper affordability assessments as to do so would risk losing business to competitors. Too many people are granted loans they cannot afford to repay and it would appear that payday lenders' revenues are heavily reliant on those customers who fail to repay their original loan in full on time.

Despite payday loans being described as one-off short term loans, costing an average of £25 per £100 for 30 days, up to half of payday lenders' revenue comes from loans that last longer and cost more because they are rolled over or refinanced. The OFT also found that payday lenders are not competing with each other for this large source of revenue because by this time they have a captive market. 

The OFT believes that these fundamental problems with the operation of the payday market go beyond non-compliance with the law and regulations. It believes that a full investigation by the Competition Commission is needed to identify and, if appropriate, impose lasting solutions to make this market serve its customers better. The Financial Conduct Authority (FCA) will regulate consumer credit from April 2014 and it will be able to use the analysis and conclusions of the Competition Commission in developing its rules and applying its powers. The FCA will have significant powers and resources beyond those available to the OFT, including powers to cap interest rates and to impose a ban or a limit on the number of rollovers lenders may offer. 
Clive Maxwell, OFT Chief Executive, said:

'We have found fundamental problems with the way the payday market works and widespread breaches of the law and regulations, causing misery and hardship for many borrowers. Payday lenders are earning up to half their revenue not from one-off loans, but from rolled over or re-financed deals where unexpected costs can rapidly mount up.

'We are proposing to refer this market to the Competition Commission, which has wider powers to get to heart of the problems in this market and to identify and impose lasting solutions that protect consumers. 

'Irresponsible lending is not confined to a few rogue payday lenders - it is a problem across the sector. If we do not see rapid, significant improvements by the 50 lenders we inspected they risk their licences being removed. Payday lending is a top enforcement priority for the OFT.'
The OFT is advising consumers to think carefully before taking out a payday loan and to be aware of their rights and where to go if they have a problem. 

Consumers struggling to repay debts can contact Citizens Advice for free, impartial advice on: 08454 040506 or at www.adviceguide.org.uk. Individual consumers with complaints should approach their lender in the first instance. If they are unhappy with the response, they can take their complaint to the Financial Ombudsman Service on: 0800 023 4567.

This is very good news for people who have been lured into the payday loan trap and is an even better reason to open an account with the local Credit Union

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