Low-income families are trapped in a cycle of exorbitant lending rates

Glasgow residents are urging local MPs to take action on the credit crisis by supporting a proposed Fair Banking Act.

Campaigners say households in Glasgow are paying an estimated £4.1 million extra each year because they’re locked out of affordable credit and forced to turn to high-cost lenders.

Activists from the Fair Banking for All Campaign met with Glasgow MPs this week to share personal stories of financial exclusion and call for change.

The proposed Fair Banking Act would require banks to report on who they lend to, improve inclusion ratings, and partner with credit unions and community lenders to ensure fair access to affordable credit

Local representatives from the campaign met at Glasgow City Chambers with Martin Rhodes MP (Glasgow North), Patricia Ferguson MP (Glasgow West), Maureen Burke MP (Glasgow North East), and John Grady MP (Glasgow East), to share personal experiences of the broken credit system, and to ask for their support for a Fair Banking Act.

One resident described being refused a bank loan to replace a broken fridge needed for medication, forcing her friend to borrow on her behalf.  Another, a single mum and carer, was denied a small loan to replace a broken bed:

“I’m sleeping badly, it’s uncomfortable, I’m sometimes in pain.  I know people who haven’t been able to repair or replace basics like a washing machine.  When there’s an unexpected cost like that you just need to get it sorted, but if you can’t get a small, affordable loan from a bank, you’re left with no good options, and that can quickly spiral into more debt and more stress.  It’s not fair that so many people in our city are locked out of affordable credit.”

Across the UK, 3.2 million people have been declined credit in the past two years.  In Glasgow the picture is much worse, with 1 in 4 households paying additional costs because they’re on a low income, known as the ‘poverty premium’.  Having to turn to high-cost credit like payday loans with ultra-high interest rates costs Glasgow residents an extra £4.1 million each year. 

Campaigners say a proposed new law - the Fair Banking Act - would change that.  The Fair Banking Act would mean that banks have to report on who they lend to, be given a rating for inclusion, and take action if it's found that they are excluding people. 

Banks could improve their rating by partnering with credit unions or CDFIs to widen access to fair credit.  These organisations are not-for-profit lenders who are able to take the time to better understand someone’s circumstances, and if appropriate offer small low-cost loans.

Chair of the meeting, and Glasgow resident Zahida, said: “The meeting was about making sure the voices of people most affected by financial exclusion are heard.  Our MPs listened carefully and showed real interest in working with us to make fair to affordable credit a reality.  We’ll keep pushing until that happens.”

Sam Rex-Edwards from the Finance Innovation Lab, which coordinates the campaign said millions are locked out of the credit system and can’t access affordable credit when they need to. 

“Affordable credit isn’t the solution to poverty, but it’s a lifeline for someone in a difficult situation, and it’s essential for many businesses to grow.  The government’s recently published Financial Inclusion Strategy is a welcome step forward, but stops disappointingly short of measures which will tackle the true scale of the affordable credit crisis.  Every day the poorest people are paying the most for credit - we urgently need a Fair Banking Act.”

Martin Rhodes MP for Glasgow North added: “I support the call for a mechanism to ensure banks partner with specialist community lenders like credit unions and CDFIs to expand access to affordable credit, and I’ll be writing to the Economic Secretary to the Treasury, Lucy Rigby to ask her to secure this for the long-term.  This would prevent people needlessly paying a poverty premium for credit, and would enable businesses to start and grow both here in Glasgow and across the country.”

Sharon MacPherson, chief executive of Financial Inclusion for Scotland, added:

“Glasgow has some of the highest levels of financial exclusion in the UK.  A Fair Banking Act would help ensure everyone - not just those on higher incomes - have fair access to affordable credit and have financial resilience.”

Supported by actor Michael Sheen, the Fair Banking For All Campaign is a national campaign calling on all MPs to support a Fair Banking Act.  For more information visit.