Salad Money Credit Where Its Due Report WEB SINGLES - Flipbook - Page 4
THE JUDGEMENT
PARADOX
Too often, people are locked out from affordable
financial products, then castigated for making the
only choices available to them
• 13 million adults have
“low financial resilience”
according to the Financial
Conduct Authority – a near
20% jump since 2020.
• The number of UK
consumers who are
struggling to meet bills
and credit repayments
has jumped 40%, or 3.1
million, to 10.9 million
from a year ago.
• The impact of the cost of
living has led to around
half of UK adults, or
28.4 million people,
saying they feel “more
anxious or stressed”
about paying bills than six
months ago7.
Credit doesn’t have to be harmful.
It’s a tool which 9 out of 10 people
use to get by, to spread costs over
time, to budget. When credit is
offered responsibly by lenders and
used appropriately by customers it
is valued.
Open Banking gives us visibility.
More and more people are excluded
from mainstream financial services:
the overdrafts, cheap credit cards and
loans which many in society take for
granted. If we accept that someone
on a ‘good’ salary might need to
use credit, is it such a stretch to
understand that people surviving on
much lower household incomes may?
‘Financially vulnerable’ and ‘financially
excluded’ people, and people with
‘low financial resilience’ aren’t stupid.
People borrowing from high-interest
lenders and loan sharks aren’t doing
so because they haven’t bothered
to find a cheaper rate. Often, people
locked out of mainstream financial
services are exceptional at managing
their budgets, getting by on small,
variable incomes, and making every
penny count.
We’ve woken up to the inequity that
people who use prepayment meters
for their gas and electricity have
been charged much more for the
same utilities than others on direct
debits. Other examples of the ‘poverty
premium’ – the extra costs people
on low incomes pay for essential
products and services – include
higher insurance premiums, paying to
access cash, and higher cost credit.
If someone can afford the
repayments, and wishes to use credit,
they deserve a fair lending market.
But traditional credit scoring, which
serves ‘prime’ credit markets well,
fails and harms people who are ‘credit
invisibles’ along with the financially
vulnerable and excluded, as the FCA
acknowledged in 20228 and we and
other social purpose lenders explored
in a 2023 paper9.
7
Financial Conduct Authority: Financial Lives Surveys, 2022 and 2020
FCA: Credit Information Market Study Interim Report, 2022
9
Salad Projects and Responsible Finance: Building Financial Inclusion with a Better Approach to Credit Scores, 2023
8
4
Credit Where It’s Due
