Fair4All Finance’s new report entitled ‘Access to credit and illegal lending: The shape of the market is as important as the size’ looks in detail at the changing shape of the consumer credit market, and how with shrinking provision, demand is often being met by unregulated loans from friends and family and sometimes illegal lenders.
It says that the last decade has seen significant shifts in the UK credit market, with access to those on the lowest incomes becoming increasingly difficult, and that balancing welcome consumer protection with access is difficult. For many lower income households it has become harder to borrow. However their need for occasional access to smooth expenditure and manage their finances remains.
The quantitative report aims to build on last year’s ‘As one door closes…’ report in which Fair4All Finance highlighted the dangers of a growing credit vacuum for people on lower incomes and in financially vulnerable circumstances.
The findings from the two weighted GB online surveys undertaken in 2023 indicate that over 10m people say they had borrowed from friends or family in the previous 12 months, and more than 3m people had potentially used an unlicensed lender or loan shark in the last three years.
Newly released data in this report shows how 7% of respondents said they or someone in their household has used an illegal lender, and how 16% of those declined for regulated credit had either used a loan shark, or know someone in their household who had – compared to 5% of people who had successfully applied for mainstream credit.
The report makes recommendations for change by widening access to affordable credit and taking a preventative approach to illegal lending growth.