A new social enterprise has been launched in the UK to 'shake up' the high cost rent-to-own sector and provide fairer loans to those on low incomes for emergency purchases such as washing machines and fridge freezers.
Fair For You is a charity that has a not-for-profit community interest company (CIC) lending arm.
The social enterprise started lending late last year but was officially launched at an event held in the House of Commons last week. Chair of the All Party Parliamentary Group on Debt and Personal Finance and Labour MP Yvonne Fovargue said: "Fair For You is a real alternative to Brighthouse and the other rent to own companies. It offers a better deal, it won’t fleece them, it won’t rip them off, it’s ethical and they won’t have the poverty premium that so many people find."
According to statistics from the Bank of England unsecured borrowing is rising at its fastest pace since 2006. Fair for You aims to provide transparent and affordable credit for essential household items to families who do not have access to mainstream finance. Its business model has been developed following extensive market research and consultations with family households that have an overall income of less than £25,000 to ensure it offers credit to meet their needs.
Importantly and in contrast to many of its commercial competitors, Fair for You offers customers the choice to repay loans early with no penalty. Fair for You also actively encourages customers to overpay, which many do; and there are no added fees for missed payments.
Loans average around £300, are delivered online and customers can access telephone support seven days a week.
Angela Clements, CEO of Fair for You, said: "It is now harder than ever for lower income working family households to access affordable credit when hit by a relatively minor emergency such as a broken essential household item.
“So many households would struggle to access £300 of savings to overcome an emergency purchase, even though they have a high propensity to repay a loan. What they need is access to credit quickly to keep their homes running, their children in clean clothes, and eating hot meals.
“This means that the only credit available to them is from high impact, high cost lenders that trap them into paying a disproportionate cost for credit for longer than necessary."
A price comparison analysis by the charity Church Action on Poverty shows that buying a new Hotpoint 60cm fridge freezer from Fair for You – rather than the market leader Brighthouse – could result in a total cost saving of £742.35 on the total cost of credit for the purchase.
Niall Cooper, director of Church Action on Poverty, said: "This price comparison demonstrates the huge savings that customers can make. Paying the same weekly amount, they can buy a fridge freezer in 69 weeks with Fair for You, whereas they would have to carry on paying for another 87 weeks to buy the same item from Brighthouse."
Fair for You has received funding from a number of partners, including the Esmée Fairbairn foundation, the Joseph Rowntree Foundation and the Funding Network.
Fovargue, the Labour MP for Makerfield, concluded: "The ethos of Fair For You couldn't be more different to that of Brighthouse. It developed out of the Credit Union movement and is about lending to low income households to help them out of poverty, not trapping them in poverty. What tips so many people over the edge is the emergency – the broken washing machine that needs replacing. It’s not people going in there just wanting goods they can’t afford."
The above article by Ellie Ward first published on pioneerspost.com in Feb. 2016.
