Poorer people in Britain are being excluded from the financial system and forced to rely on expensive and substandard banking products, according to a new report. There are 1.7 million adults in the country that do not have access to a bank account, the report said, raising the risk that they will turn to high-cost sources of credit such as payday loans, ‘doorstep’ loans sold at a customer’s home, and a system known as rent-to-own.

In the latter method, a company rents consumer goods to a customer at a high cost, with ownership not transferred until the final payment. Usage of rent-to-own has more than doubled in the last five years to over 400,000 households in Britain, according to Christine Allison, financial inclusion fellow at the Centre for the Study of Financial Innovation.

Despite the best efforts of successive governments, there is a serious problem of financial exclusion in the UK.  More than a million adults do not have a bank account; 50% of households in the bottom half of the income distribution do not have home contents insurance; 2½ million use doorstep loans; more than 400,000 households use ‘Rent-to-Own’. Despite significant reforms introduced in 2014 and 2015, there is still a thriving, payday lending industry that addresses a real need for short-term credit – while, at the same time, often aggravating the problems that caused that need in the first place.

The Full report: Reach the Poor can be viewed here.