A UK financial wellbeing platform has said that employer power can put an end to the payday loan industry, based on an analysis of around 400,000 payday loan applications* over the last 12 months.
The Chancellor revealed ahead of his Autumn Budget Report that he will look to unveil an Australian style short-term, no-interest loan scheme for those on low incomes in Britain.
This has been welcomed by London-based FairQuid, as a positive step towards lifting people from debt and ending the poverty premium, however, they have identified that it is us, UK’s employers, that can make an immediate change, at no cost to ourselves.
FairQuid – who also this month published a year-long study** highlighting the UK’s top five most vulnerable payday loan lending regions – has found that on average people borrow only 6.8 days of their wages at high-cost credit. Interestingly they had also been with their current employers, on an average, a stable 46 months at the time of their application.
FairQuid has affirmed that the majority of UK employees have less than £100 savings and have no means to meet any unexpected bills or expense, a view backed by StepChange Debt Charity. Their advice that people need at least two week’s worth of average wages, or £1,000, as a minimum requirement.
According to Money Advice Service data, 23 million UK adults don’t don’t meet the above StepChange minimum rainy day saving recommendation.
The FairQuid model partners with employers to offer their employees fair access to loans & savings accounts through community credit unions who are member-owned, not-for-profit financial institutions.
Furthermore, its model provides fair access to all irrespective of their credit scores or blips on their credit files. Taking a more forward-looking view on individuals, it opens up access based on stability of employment and performance.
While taking out a loan with FairQuid, there is a bundled savings element whereby employees can save up to 2 weeks worth of their wages by the time it’s repaid helping end the cycle of persistent debt (and meet StepChange’s recommended target).
Therefore, by partnering with the platform, employers can make saving regularly easy and convenient effectively ending the era of the high-cost credit industry and future-proof their employees from falling into a debt trap.
FairQuid CEO Vishal Jain said:
“Dependency on short-term high-cost borrowing doesn’t discriminate, the issue affects millions of people in all corners of the country. Employers are in a unique position to nip this in the bud, they have a vested interest to ensure the mental and financial wellbeing of employees. Something that rewards individuals for loyalty at the employer and doesn’t cost anything, should be a no-brainer”
