Time's Up For Doorstep Lenders

By Leeds Credit Union

Following the news that doorstep lender Provident Financial is to close its business after 141 years, an opportunity to make the UK loan industry more responsible and sustainable has presented itself.

Companies like Provident rose to prominence by offering high-cost, short-term loans to customers with weak credit histories who had been turned down for loans by high-street banks. However, significant financial losses and a deluge of complaints about mis-selling and affordability checks - led by claims management companies - has now caused Provident to close its home credit unit for good. 

With regulations governing the loan industry becoming increasingly stringent in recent years, the number of high-cost lenders has decreased dramatically at a time when the poorest members of society need access to financial products and services more than ever.

This has resulted in a gap in the market which needs filling by more responsible lenders, such as credit unions, before more unscrupulous doorstep lenders beat them to it.

Regulated financial cooperatives that are owned by their members, credit unions provide straightforward, affordable financial services to people in the most vulnerable circumstances. With lower interest rates and in-depth background checks to ensure customers are able to repay any loans without risking more financial hardship, credit unions offer a more reliable source of finance than doorstep lenders. And, with no shareholders to answer to, they put the interests of their members first, providing them with the most appropriate services for their circumstances instead of adopting a 'one size fits all' approach which isn't always suitable.

At a time when many people face financial uncertainty as a result of the Covid-19 outbreak and with doorstep lenders decreasing in number all the time, the time has come to revolutionise the way in which companies lend money to consumers.

With non-profit organisation Fair4AllFinance estimating that as many as 11 million people in the UK have recently used some form of high-cost credit, putting them in a vulnerable financial position, and research carried out by the University of Salford revealing that low-cost credit can improve financial resiliency, it is clear that a significant proportion of the population is crying out for the type of affordable credit provision only a credit union can provide.