Home lenders highlight their difference
Doug Martin gives a direct assessment of the role of door-to-door lenders in the UK financial sector.
“We sit between the banks and the guys walking around with baseball bats,” says the managing director of Morses Club, a Worcester-based alternative finance company whose agents cross the thresholds of some of the poorest households in the country. UK by collecting weekly cash refunds.
While the payday lending industry has grown from £ 800m to £ 2.2bn in four years, it is still eclipsed by the £ 4bn of loans made by home lenders in 2012, the figures show. of the Ministry of Business, Innovation and Skills.
Amid the political clamor for tighter regulation of the high-cost credit market, door-to-door lenders fear they will also face crippling new compliance burdens.
Dominated by publicly traded lenders, the self-proclaimed home-collected credit industry says its lending model is more responsible than its payday peers, citing how home loan portfolios shrink during the recession as they tighten the criteria for lending to cash-strapped customers. .
A very different model from the online platform of payday lenders such as Wonga, the 480 agents in Walrus make weekly home visits to collect cash payments from their borrowers. Spread across the UK, the company avoids Greater London because the population is too transient, and avoids loans to tenants in towers, as these are seen as a risk to the safety of its agents.
As clients typically enjoy benefits without a credit history, it is up to field agents to establish the creditworthiness of their clients, often through unconventional means.
Walrus has around 55,000 accounts, making it the fourth-largest door-to-door lender in the UK, after listed companies such as Provident Financial and S&U. With a loan portfolio of around £ 25million, the company says it collects around 95% of the money owed to it. He made a profit of around £ 3million last year.
“I call it kind of social work,” says Walruses collector Anne Ceras as she stops at a house in Cinderford, Forest of Dean. The former coalfield is best known today for its association with the Outlaws, biker gangs rivaling the Hell’s Angels.
While collecting money from a new borrower, Ms Ceras can’t help but notice the number of tattoos on her arms and neck. “These all cost a lot of money,” she said, out of earshot.
Due to the regular income offered by the allowance system, this mother of five living in rental accommodation with her spouse and receiving a jobseeker’s allowance is considered to be a much better credit risk than a person in a household. low paid job.
The granting of a loan depends on the judgment of Ms. Ceras. Home agents are expected to pick up on telltale signs, whether it’s the lingering smell of cannabis smoke from an upstairs room or an overabundance of flat-screen TVs. and expensive gadgets that could indicate that the household already has a heavy debt repayment schedule to meet. .
“But, if people are good payers, they can build their own credit history with us,” she says.
A typical Walrus loan ranges from £ 100 for new clients up to £ 1,000, repayable weekly over a term of 34 or 50 weeks at an annual interest rate above 200%.
No penalty is incurred for late payment – a factor, Martin says, is built into the price. Walrus will not renew overdue loans and will only re-grant credit if 50 percent of the old loans are already paid off.
This is in contrast to payday lenders, who repeatedly renew overdue loans knowing they have access to a borrower’s bank account and can use what are known as continuous payment authorizations.
Additionally, if payday lenders see their wings cut off by regulators, door-to-door lenders could be presented with an opportunity to grow.
Provident Financial, the largest home-based lender with 60% market share, is launching a TV ad campaign this week for Satsuma, its new online installment loan product.
A cut above the door-to-door collection clientele, these “segment” loans are offered to clients with salaries, bank accounts and Internet access – an opportunistic move anticipating that the Financial Conduct Authority will limit rollover rules of debt in the breakdown service.
Peter Crook, Managing Director of Provident, adds: “It is a mistake to think that our clients do not know how to manage their finances. They do.”