Can we bank on the banks?
Bankers may never recover from their sudden descent to the position of Most Hated Human Beings, barging aside traffic wardens and tax collectors to reach it in 2008. The rest of us are still recovering from the banking crash. Many people don't trust high-street banks, many others find they can't get the loan they need from banks so turn to payday lenders and loan sharks instead. Some people have never had a bank account, but are being told they must get one because of Welfare Reform. So do we have any realistic alternatives to high-street banks? And what sort of institutions should we build for the future?
The Big Debate - Should Credit Unions Offer Pay Day Lending Products?
To be discussed at FinCan meeting Friday 6 June at Gateshead Advice Centre
Gareth Evans, Associate Research Manager at the Financial Inclusion Centre, will present the evaluation findings of the London Mutual Credit Union CUOK Pay Day Lending project. Contact Fincan to attend.
Has our banking system jumped the shark?
Institute for Public Policy Research has issued a report called Jumping the Shark: building institutions to spread access to affordable credit. Rather than just tightening regulation to protect consumers, it advocates building a systemic alternative to high-cost, short-term loans – a Affordable Credit Trust that will capitalise and develop a diverse range of local not-for-profit institutions that lend small amounts at affordable rates and facilitate saving. Read more here
The 'Harm index'
The think tank Demos has issued a report saying that loan companies who cause significant harm, such as stress and mental anguish, should face greater financial penalties. It has developed a new ‘Harm Index’ to reveal the true impact of various debts - combining financial, emotional and social consequences. Read more here
Jam jar accounts, or budgetting accounts help people to manage their money by keeping money they need for the rent and other bills safe in a separate 'jam jars'. One problem is that they usually charge around £5 a month. Some credit unions offer jam jar accounts designed for social tenants, for example, the East Midlands Credit Unions (EMCU) got together with local housing associations to create a Rent Payment Account: the credit unions arrange to pay tenants' rent direct to the landlords, and the landlords pay the fees associated with their tenants accounts.
Ethical banking – a big opportunity for Britain’s retail banks
Research commissioned by EIRIS, a leading global provider of research on corporate environmental, social, governance (ESG) and ethical performance, found that nearly half (49%) of British adults agree that their bank should only lend to businesses that at the very least meet minimum ethical, social and environmental standards. Read more here.
Islamic banking for all
The CEO of Abu Dhabi Islamic Bank (ADIB), one of the largest Sharia-compliant lenders in the region, has said that Islamic banking is for everyone and offers an ethical banking alternative that supports the real economy. Read more here.
The Direct Debit trap
Direct debits are useful to make sure bills and rent are paid, but Money Saving Exert warns that people must make sure they cancel those that are no longer needed. Some people continue paying for white goods for years after the installment plan has ended. Client also need to beware auto renewals. Read more
Could local currencies or even a barter system make up the shortfall in budgets rather than a loan? Aeon magazine looks at currencies such as bitcoins and the Brixton pound, and questions what money is anyway.
Triodos teams up with catholic community
Members of the Catholic community can now choose ethical banking, thanks to a new partnership between the catholic aid agency CAFOD and Triodos Bank. For every new savings accounts opened with Triodos via the special link on the bank's website triodos.co.uk Triodos will donate £40 to support CAFOD's work in the poorest countries around the world.
Robin Hood tax?
France and Germany led a group of countries on Tuesday in pushing for a tax on financial trading although the levy is set to fall far short of what was pledged at the height of the financial crisis and may be pared back further. Read more
How much do we owe?
The Money Charity released its Debt Statistics in May. The UK is seeing the biggest increase in loans and overdrafts for individuals since February 2008, according to the latest figures from the Bank of England.
£54,546 average household debt (inc mortgages) in March, up from £54,434 in February
£6,048 average household debt (excl mortgages) in March, up from £6,020 in February
£161 million of interest was paid every day on personal debt in March
£1.645 billion daily value of all plastic card purchases in February
£1.441 trillion was the value of outstanding personal debt at the end of March, up from the same period last year
See the full statistics on the Money Charity website
Who can help?
The Money Advice Service has a useful 3-minute video about choosing a bank account. It has a comparison table and answers the question: Which accounts can receive benefit payments?. Click here for more details.
My Home Finance offers access to bank accounts, loans at affordable rates and budgeting accounts to people who might not otherwise be able to get them. It is a not-for-profit social enterprise set up by the National Housing Federation, supported by the Government, Royal Bank of Scotland, Wates Giving and a number of housing associations. Click for more
Credit Unions are co-operatives – self-help organisations owned and democratically controlled by their members. So loan rates tend to be affordable and the credit union gets involved in the local community. You used to have to save before you could borrow, but this is being relaxed. To find one see ABCUL
Peer to peer lending is an ethical alternative to a bank loan, for example Zopa was launched in 2005 and has lent money to 80,000. Interest rates will be lower than payday loans or loan sharks, and its fees are low. See Money Saving Expert's guide.
The Ethical Consumer rates banks and building societies on their ethical credentials. Read its findings here.
Money Saving Expert has a page about different types of accounts, but because it is aimed at all income brackets, it is a little mind-boggling. MSE also talks about Piggybanking. It’s forum has a lively discussion with people recommending their banks. Click here
One of the options described by Money Saving Expert is a Basic bank account. These simply offer a place to store your money and pay it out from, without overdraft facilities or any in-credit interest. Clients may be charged fees if they try to make a payment and the money is not there. For more details see Money Saving Expert