Payday lenders have been named and shamed as the most unhealthy form of credit available in the UK, in a report launched in Parliament by RSPH, at an event attended by MPs and campaigners – including actor Michael Sheen – from the End High-Cost Credit Alliance. RSPH is calling for action to end the marketing of high-cost credit to vulnerable people.
The publication of the Life on Debt Row report is the first time a major public health body has holistically documented the health and wellbeing impact of different forms of credit. Payday loans ranked as having the most negative impact on mental wellbeing, followed by unauthorised overdrafts, doorstep loans and weekly payment stores. More affordable forms of credit, such as that offered by credit unions, were ranked as having the least serious impact on wellbeing.
The report shows how the UK’s burgeoning high-cost credit sector is having a destructive effect on mental wellbeing, social connections, and many other health measures, including driving tobacco and alcohol consumption among some of society’s most vulnerable people.
Those with poor credit ratings are most vulnerable, as they are excluded from lower interest forms of credit and subject to a ‘poverty premium’, whereby customers on low incomes are forced to pay more for essential goods and services.
Specific health impacts identified by the report include:
- Those who have used at least one payday loan feel more judged and spend more time alone as a result of distress or depression than the average credit user. Their health behaviours are also more adversely affected: they eat less healthily, skip more meals and do less exercise. Nearly half (49%) of credit users who drink alcohol say they drink more as a result of their debt, rising to three in five (62%) among payday loan users
- Among those affected by recent changes to benefits such as the roll out of Universal Credit, four in five (79%) say this has led them to use more credit than they would have otherwise
- One in 10 respondents (9%) have used food banks for the first time as a result of being in debt
RSPH is calling for action from the Government and the industry itself to protect the health and wellbeing of credit users, including:
- An end to targeted marketing of high-interest loans to vulnerable individuals
- Health warnings on the marketing and credit agreements of the most unhealthy forms of credit, highlighting the potential negative consequences of problem debt
- Lenders to train all employees in carrying out mental health assessments before providing credit
- Better signposting to debt and mental health services by lenders, health services, local authorities and universities
Shirley Cramer CBE, RSPH Chief Executive and Chair of the End High Cost Credit Alliance, said “In her first speech as Prime Minister, Theresa May railed against the ‘burning injustice’ of health inequality, against the stark fact that ‘if you’re born poor, you will die on average nine years earlier than others’. One reason for this is the ‘poverty premium’ – the system whereby the poorer you are, the more you pay goods and services, including credit.
“It is now all too commonplace to see people in desperate situations, often with low incomes and insecure employment, forced into taking out loans with punishingly high-interest rates as the only way to make it through to the next pay cheque. This system forces the most vulnerable in our society further into an inescapable spiral of debt – with all the accompanying damage to health and wellbeing, as illustrated by our report, that goes along with it.
“It is high time more financial products are developed and targeted with sensitivity to the health and well-being of the public, and not just to exploit their financial situation. The Government should recognise that the high-cost credit sector is causing serious damage to the public’s health, and fully commit to a life course solution to problem debt – ensuring all our young people are financially literate through schools, and working to ensure fairer forms of credit are accessible to all those who need it.”
Actor and activist Michael Sheen added “As a society, we believe in justice and compassion and yet problem debt is pulling more and more people into poverty, taking a hold on their physical and mental health. That is not acceptable. This report shows just how damaging it is when we have an economy, culture and infrastructure which enables finance providers to prioritise profit over our health and wellbeing.
“I, therefore, welcome the report from RSPH and the bold calls for action. Not just to policy officials, regulators and consumers, but crucially from the finance sector itself who must now be held accountable for the financial damage and health impacts caused by their practices and products. We share a moral responsibility to help protect vulnerable customers from the harm high-cost credit causes. The evidence on the impact on our health and wellbeing is now overwhelming. We have the evidence. Now we need action.
“As Founder of the End High-Cost Credit Alliance I accept the findings of this report and will be calling on our partners to review the recommendations and back a number of the proposed actions. The pragmatic approach of the Alliance should provide the opportunity to deliver improvements in the availability of affordable finance across the UK, as well as a strengthened safety net for those who need it. I believe that is the best way we can improve the health and well-being of credit users and we’ll push forward with the regulators, policy makers and wider Alliance members to make that happen.”