Cllr Andy Hull 29th November 2012 Blog London Co-operative development Communities, Housing & Local Government Share Tweet Surrounded by problems caused by legal loansharks in north London, Andy Hull, a Labour councillor for Highbury West and Co-Chair of the Islington Fairness Commission, takes a look at ways that local councils and the co-operative movement can tackle payday lenders and support communities. Usury is back. Profiteering payday lenders proliferate in every town. They flock like vultures to exploit both the economic downturn and our lax regulation of an industry that makes its money from misfortune and misery. As the BBC and Channel 4 have both recently reported, people turn to these legal loansharks because they find themselves with too much month at the end of their money. For many, the predicament will be exacerbated as the government’s cuts to benefits bite. Some people borrow to buy food or pay the rent, others to pay off the last loan they took out. Once caught in a cycle of repeat loans at four-figure interest rates, borrowing from Peter to pay back Paul, a bad situation can rapidly get much worse. Labour and Co-operative party members at every level are now wising up to what’s going on and are getting stuck in to help sort it out. Leading the charge has been Stella Creasy, MP for Walthamstow, who has blazed this campaign’s trail. Alongside her, a growing band of ‘sharkstoppers’ is now mustering, including other members of parliament, peers, community organisers and unions. Their main aim is to cap the total cost of credit. And they deserve our support. But while this national campaign is vital, there is much that can be done locally as well. Medway Council, for instance, have looked long and hard into what would make for fair access to credit. In Islington, through our Fairness Commission, we spent a year listening to local residents about the causes of poverty and inequality in the borough: personal debt was a recurrent theme. So, now Islington Council, together with its partners on the Islington Debt Coalition, has developed a three-pronged strategy of prevention, enforcement and alternatives. To help prevent people falling into financial difficulty as a result of unmanageable debt, we have opened the first new Citizens Advice Bureau in London in 20 years at a prime Upper Street location. It is now receiving over a thousand visits a month. The council, as a significant creditor itself, offers debt consolidation to people who owe multiple debts to different departments, helping them roll them into a single, more manageable debt. And we have recently bid for and won £1m of Big Lottery Fund money to promote financial literacy through educational work with young people on our estates. We are also now revisiting our planning policy in the light of the Sustainable Communities Act to see how far we can go to make it more difficult for payday lenders to open up shop in our patch, even if they do currently sit in the same use class as banks and building societies. In order to enforce what few rules there are, we are sending our Trading Standards team into the payday lenders, pawn brokers and gold buyers in the borough to do some mystery shopping. They have shut down one advance fee scammer already. But we are yet to find an effective way of mystery shopping circumstances of repeat lending or default, where, anecdotally at least, breaches of the rules are most likely. We have invited the Illegal Money Lending Team down from Birmingham to investigate alleged illegal loansharks operating in our area, with an eye to prosecution. And we have run a ‘shop a shark’ publicity campaign to encourage residents to report malpractice by lenders so we can gather the evidence the Office of Fair Trading needs to act. Finally, on offering alternatives, we are doing what we can to bolster London Capital Credit Union, based in Archway. With our help, it has increased its membership by 65% and is now offering same-day loans at reasonable rates. And we are offering all new council tenants credit union membership with a £40 incentive if they save regularly for six months. The co-operative movement is ideally placed to help. We should be encouraging organisations – not just individuals – to take out corporate membership of their local credit union. We should be looking for high-vis shop-front premises for our credit unions, ideally at peppercorn rents, so they can go toe-to-toe with the likes of The Money Shop on our high streets. And we should be pushing for Co-op supermarkets and others to accept deposits into credit union accounts over their counters. Ordinary households up and down the country are struggling with problem debt. Common triggers include redundancy, relationship breakdown and bereavement. Predatory lending to people in such circumstances shouldn’t be fair game. We’ve had long enough to get mad. Now let’s get organised.