Earlier this week Leeds, along with other West Yorkshire Councils blocked access to Wonga and other payday loan companies from any Council computer including libraries and other public access terminals. This is in response to the rise in people getting into spiraling debt problems with this sort of high interest borrowing.
Councillors were given an example of someone borrowing £200 from Wonga for one month. If they pay this back within the month it will cost them £237. If they can’t pay it back and the loan rolls over two further months, the cost will rise to £437. The debt escalates and becomes harder and harder to repay.
Council research shows starkly how the recession has hit families in the less affluent parts of the city. In 2004 37% of families interviewed had no savings. When the interviews were repeated in 2010 that figure had risen to 70%. The number of families who were borrowing to pay for day to day living expenses had risen from 23% to 42%.
Councillors were also reminded of the benefit changes that have come in in recent months – the so-called bedroom tax, cuts to Council Tax Benefit and the benefit cap affecting larger families. The imminent introduction of Universal Credit will see families paid their benefit monthly in arrears to mimic a salary, but this will make people receiving the benefit a target for the payday lenders.
The Police report that there has been a rise in “acquisitive crime” (stealing things) in particular shoplifting food. There has also been a rise in domestic violence.
There are alternatives to high interest lenders, for example a loan from Leeds City Credit Union is much more affordable, but they don’t have the same advertising budget or the staff to go door to door offering credit (and collecting debts). The council offers goods (eg white goods, food boxes) through its Local Welfare Support scheme and two food banks have recently been set up in South Leeds.
Councillor Kim Groves pointed out that these problems are not just faced by unemployed people and that most people on benefits are working in low paid jobs. She also said that the high interest lenders are out on the estates now and a more urgent response was needed.
Councillor Judith Blake raised the issue of children who are often the hardest hit. She said we had to get over the stigma of free school meals and increase the take up of nutritious meals that are worth £1,000 per year to a family with three children. She welcomed that the Council is channelling help, support and advice on benefits and debts through Children’s Centres.
Councillors welcomed the actions that the Council was taking with partner organisations, but called for a quicker decisions on Discretionary Housing Payments and easier access to Local Welfare Support scheme.