Not quite sure where to start today, the logic running through this piece is so tangled.
The subprime savers are the wretched Farepak people who were not even borrowing money, only saving for zero interest. How can a company fail when all it did was take in poor people\’s money for a whole year, pay them no interest, in exchange for an above-high street-priced catalogue of goods at Christmas time? There was no credit or interest offered, only a "safe" place for cash. Families living on the edge want to put Christmas money out of reach. Why ordinary banks aren\’t offering the same fixed-date deal, with no or low interest, is a mystery.
I\’m pretty sure that you can in fact deposit money in a bank account at no interest you know. Not 100% sure, but pretty certain.
No government will give a blank cheque against every failed enterprise, but the difference was in the instant reaction to Northern Rock. Overnight all bank savers got a cast-iron £35,000 guaranteed – a sum unimaginable to Farepak or First Solution savers.
Wasn\’t actually much of a change though. £32,000 or so was already guaranteed .
In the 10 years since Labour came to power promising to start a people\’s bank to give modest access to credit to those in most need, nothing has been done. Basic bank accounts now receive benefits, pensions and wages, but they offer no credit, not the smallest overdraft facility.
See, Polly agrees, you can deposit money at no interest in a bank account.
People on low incomes need ordinary bank accounts with easy access via cash machines, and a credit facility at a fair interest, like everyone else.
Ah, now we\’ve morphed to offering credit, rather than a safe place fo savings. Something a little different, isn\’t it?
Poverty is their problem: most are relatively prudent, or else they\’d starve (benefits for a family of four total only £200 a week).
I beg your pardon? Is that really the number? Including housing benefit? Seriously, I don\’t actually know and would like to.
That\’s where this always returns. People on subprime pay and benefits are just too poor to save – and yet they have to borrow when minor mishaps cause financial catastrophe. So loan companies can charge what they like – check out the Provident\’s site for loans at 183% APR – often with worse rates door to door.
Mhmmm. 183% APR eh? Wonder how they\’re making money on that. There are in fact non-profit lenders in the US who offer this sort of credit to the poor:
But alternative payday loans have also drawn criticism from some consumer advocates, who say the programs are too similar to for-profit payday loans, especially when they call for the principal to be repaid in two weeks. At GoodMoney, for example, borrowers pay $9.90 for every $100 they borrow, which translates to an annual rate of 252 percent.
Sounds like Provident is offering a good deal really.