Our campaign to cap high cost credit

1. High-cost credit in Oxford
& what we can do about it
Oxford

2. Stronger Together Partnership
Citizens Advice Oxford
Agnes Smith Advice Centre (Blackbird Leys)
Oxfordshire Community Work Agency (Barton)
Rose Hill and Donnington Advice Centre
Oxfordshire Mind
Shelter
Refugee Resource
Asylum Welcome

3. What is high-cost credit?

4. What is high-cost credit?
High-cost credit products have
very high interest rates
(at least 50%, but sometimes
up to 1,500% APR).
For example, borrowing £500
can mean paying back £1125
and incurring additional charges
if the repayment is not made
on time.

5. Some examples
Doorstep loans – Some doorstep lenders pressure people into taking loans.
Rent-to-own credit – Rent-to-own companies inflate prices of goods and then add
on further costs by charging high prices for compulsory aftercare services.
Guarantor loans - Guarantors are often not aware of their liability and don’t get
enough notice when they are required to make payments.
Logbook loans - Logbook loans are antiquated and complex and put borrowers in a
vulnerable position with little protection from repossession of their goods.
Unarranged overdrafts - Unarranged overdraft fees can lead to spiralling and
persistent debt and too little is done to help people avoid fees and charges.
Catalogues – Catalogues often have unclear terms and conditions and the costs
can double with interest after 12 months.

6. Our research on high-cost credit
We used casework data from the advice agencies in the
partnership to investigate trends in high-cost credit debt
from 2014 to 2017 (over 1000 cases in total).
We ran focus groups with our specialist debt advisers to
gather their feedback on the issues faced by clients with
high-cost credit debt.
We carried out in-depth interviews with five clients who
had high-cost credit debts to highlight the impact of
high-cost credit debt on their lives.

7. Is high-cost credit a problem in Oxford?
10 of Oxford's 83 neighbourhood areas ('Super Output
Areas') are among the 20% most deprived areas in
England, according to the 2015 Index of Multiple
Deprivation.
The members of the Stronger Together partnership
work with Oxford’s poorest residents and in 2016-2017
advised over 180 people with high-cost credit debts.
Most of the clients who came to us with high-cost credit
debts live in OX3 and OX4 areas.

8. What has been the local impact of the
payday loan cap?
In 2015 the Financial Conduct Authority introduced a
total cost cap for payday loans. This means that people
can’t pay back more than twice what they borrowed for
a payday loan.
Data from the Stronger Together
partners shows that reported
payday loan problems have
more than halved since the
introduction of the cap.

9. What about other types of high-cost
credit?
At the same time, the proportion of clients in Oxford
experiencing issues with other types of high-cost
credit has increased.
Before the cap, 10% of clients with
financial problems had high-cost
credit debts. This rose to 18% over
2016- 2017, according to
Citizens Advice Oxford data.

10. Profiles of those we have helped with
high-cost credit problems
3 / 5 have mental health issues 3 / 5’s income is under £799/month
1 / 2 is a social housing tenant 1 / 2 has dependent children

11. Three major problems with high-cost
credit:
• Poor affordability checks
• Unclear terms and conditions
• Improper practices

12. Absence of affordability checks
At the home visit, the rep checked a few letters to make
sure that I had benefits coming in. He asked a couple of
questions about spending, but it was very basic. It only
lasted15 minutes and I got the cash straight away. I've
had two loans from them in the past which I never paid
back so they should have known that I couldn't afford it.

13. Unclear Terms and Conditions
They mentioned that if I cleared the debt within the first
month that I would be ok, but they did not tell me
what the total cost with interest of repaying the
debt would be.

14. Improper practices
Dealing with this company at first was pleasant and fine, but
now it has turned into downright terrifying. Now they are
phoning me sometimes up to six times per day, sometimes
from a private number or long distance. They just phoned me
ten minutes before I came here. Most of the time I just don't
answer, but when I do, all they're doing is threatening what
will happen if I don't pay the money. When I was out once, I
got a call saying they were at my place and were threatening
to break in if I didn’t pay immediately.

15. The story so far…
2013
Bristol University publishes a report on high-cost credit calling for a cap.
Government responds by stating that it will not set a cap on high-cost credit.
Business, Innovation and Skills Committee report finds evidence of poor practice.
Archbishop of Canterbury speaks out against payday loans.
Financial Services Banking Reform Bill passed to require Financial Conduct Authority to
look into payday loans.
2015
Financial Conduct Authority rolls out cap for payday loans.
2016-2017
Review of impact of the payday loan cap by the Financial Conduct Authority.

16. What can we do now?
The Financial Conduct Authority (which is accountable
to the Treasury and to Parliament) is currently reviewing
the impact of tighter regulation on the payday loan
sector. The outcome of the review is likely to be
announced in the autumn.
Now is the time to draw attention to the success of the
total cost cap on payday loans and extend it to all types
of high-cost credit!
This can be achieved by amending the Financial
Guidance and Claims Bill currently being examined in
Parliament.

17. Presented by Citizens Advice Oxford
22nd June 2017