My Home Finance will drive out loan sharks, says MP
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His prediction - and a robust condemnation of illegal lenders who prey on vulnerable people in one of Birmingham's poorest constituencies - came at the official opening of the Erdington branch of My Home Finance.
Guest of honour Mr Dromey praised the National Housing Federation, local housing associations including Bromford and Mercian, the Royal Bank of Scotland and the Wates Foundation for working together to launch the pilot not-for-profit loans and money advice service in the West Midlands.
Erdington is the third My Home Finance shop in Birmingham and the ninth in the region, with a tenth at Tamworth to follow. The network is already helping scores of low-income customers to borrow relatively modest sums of between £250 and £500 - and escape the clutches of expensive doorstep lenders and illegal loan sharks.
The project and the partners won warm praise from Mr Dromey, who said before cutting the ceremonial ribbon that My Home Finance would make a big difference to people who struggle to access affordable credit - and to the community as a whole by freeing up more local spending power.
"The loan sharks will remain a problem but ultimately we will drive them out of Erdington and Birmingham," said the Labour MP, who represents what is one of the poorest constituencies in Birmingham - and Britain.
"The loan sharks will no longer be able to take advantage of the vulnerable. Those people will have access to affordable credit and finance in the way that they need to and the people who come here and get help will then be spending more money in the high street."
Mr Dromey spoke at Central Square Shopping Centre on Friday after a welcome from My Home Finance board member Philippa Jones, also executive director with the Bromford social housing group.
"We chose the West Midlands for the pilot because of the very high levels of unemployment here and the very high degree of personal debt combined with a lack of access to affordable credit," she told representatives from the NHF, housing associations, the RBS and Wates.
"Jack asked me why housing associations want to support a new venture like My Home Finance - particularly given that this shop is open to everybody and not just social landlord customers.
"The answer is that we as housing associations often see our customers coming through the door with major debt problems because they can't access the kind of affordable credit that most people take for granted.
"They end up using regulated doorstep lenders, which can cost them easily 200per cent APR, or at worst the unregulated end of the sector, which can cost them anything up to 2,000% APR as well as expose them to the threat of intimidation and violence.
"So for those of us in housing who care not just about our customers but also about the wider community a new service like My Home Finance makes absolute sense."
Mercian Housing Association MD Laurice Ponting, who attended Friday's launch, said: "It's not just a question of making it possible for vulnerable people to borrow at much less expensive rates.
"My Home Finance branches also offer friendly advice and help with opening bank accounts, savings and contents insurance - encouraging people to build up their savings and to take control of their finances. This is a fantastic opportunity for social housing residents - and anyone else in the community - to improve their life chances."
Erdington office manager Itisam Akhtar says many customers tell of bad experiences with doorstep lenders and loan sharks - and appreciate the My Home Finance alternative of being able to borrow at 29.9% APR*.
He and his team have completed more than 20 loans since the Erdington High Street shop opened in mid December, with a typical loan being between £250 and £500.
It's estimated that around 2.5million people in the UK borrow from doorstep lenders at rates of almost 300% for new customers and a further 200,000 borrow from illegal loan sharks at rates of anything up to 2,000%.