Author: Skyla Rabadi

Government Aims To Address Debt Burden Through No Interest And Extended Repayment Schemes

According to the Office of National Statistics, for the first time in 30 years, UK households have collectively spent more than they have earned in 2017. Their total expenditure for the period came to on average £900 more than their income; thus pushing them into a financial deficit for the first time since the credit card boom of the 1980s. The deficit, which amounted to nearly £25bn, was equivalent to almost a quarter of the NHS budget. Though most households fell into the cycle of overspending with the money they had borrowed, a number of the households also ran down their savings.

The government, in its autumn budget, announced new measures to help citizens in debt. Referred to as the ‘Breathing space’ scheme and the ‘No-interest loans’ scheme, these measures aim to tackle the problem faced by about three million people in Britain, who are facing the pressure of debt caused by borrowing from high-cost lenders such as payday and credit card companies.

Currently, over 16.8 million people in Britain have less than £100 savings. This leads to financial stress and takes a toll on their mental health. Over a million people turned to high-cost credit last year to meet their basic living expenses, which is in the end counterproductive both for households and the country’s economy. The problem of high-cost credit is intensified by insecurity in the labour market and the growing use of zero-hour contracts. This, in turn, implies that when people do not plan their budget and overspend, they get into debt, as they have no savings. This will have a negative impact on their credit ratings, distancing them even further from fair credit opportunities.

Therefore, the UK government, working with leading debt charities and the banking industry, has decided to launch a feasibility study to help design a pilot for a ‘No-interest loans’ scheme in early 2019. While, under the other ‘Breathing Space’ scheme, people who are in debt will get a 60-day period of protection against creditor action. This will give them more time to seek advice and make plans to repay their debt in a manageable way.

The decision makers drew inspiration from the No Interest Loans Scheme of Australia, which provides people with low incomes access to safe, fair and affordable access to credit. The scheme offers loans of up to $1,500 for essential goods and services and not for cash. Repayments are structured over 12 – 18 months. There are no interest charges or fees.

Though there are many organisations imparting financial education to create awareness for lowering debt and increase savings, there is a need for a strong practical solution that can work alongside these plans. FairQuid, a financial wellbeing platform, believes credit unions play a central role in tackling these issues.

Currently, credit unions in the United Kingdom could help millions of Britons who are excluded from mainstream finance. They play an important role in facilitating savings and offering affordable loans to their members. The Financial Conduct Authority (FCA) regulates credit unions but as they are run for the benefit of members, not shareholders, they can offer ethical saving schemes, competitive loans and other financial products, not usually available to individuals excluded from traditional financial organisations.

The FairQuid Wellbeing Platform has been designed to work in tandem with employers to develop innovative solutions that benefit both credit unions and employees. It is a win-win situation for all. The platform educates employees about personalised financial tools to make better finance-related decisions and take control of their finances. On the other hand, for employers, it prevents mental health issues in workplace, boosts engagement levels, and increases employee retention.

The budget also has a provision to support this credit union sector. To help people increase their financial resilience while boosting awareness and membership of these community organisations, the budget commits to launch a pilot of a new ‘prize-linked saving’ scheme for credit unions.

By helping households manage their unexpected costs through increased access to fair and affordable credit, and motivating them to create a safety net of savings, the government is taking a big step towards its citizens “being and feeling financially secure, today and in the long run.”

Mind the Gap: Making Credit Fair for Everyone

Currently, there’s been a lot of attention on fighting inequality & boosting fairness in the workplace. From the #MeToo movement to gender pay gap, we have a lot of challenges to tackle. But there’s another inequality that needs to be addressed too. The accessibility of fair credit for all.

Credit Explained

There’s no doubting that the world of credit ratings is rife with misconstrued information and misunderstanding. So, let’s understand how credit scores work.

Credit scores are used by lenders to decide whether to offer you credit (such as a credit card or a loan) and what the terms of the offer will be. The higher your score, the better your chances at receiving credit, and the lower rate of interest you will be offered. However, there are many factors that can affect your credit score, such as:

  • Payment history, i.e. late payments
  • Type, number and age of credit accounts
  • Total debt
  • Public records, i.e. bankruptcy, tax liens or civil judgements
  • Length of credit history

Differing Rates

As a result, within the UK, credit scores differ massively across demographic and geographic sectors. By analysing more than 5 million customers over the past year, ClearScore generated a list of areas with the highest and lowest average credit scores– with postcodes in the South of England with higher credit scores than those in the North. The worst area for credit is Sunderland, with residents holding an average credit score of 318.31 – almost 20% lower than the UK’s average score of 380.

Why is there so much disparity? Surely, if we as a country are striving towards fairness, everyone – no matter their location or background – should be entitled to fair, affordable credit.

Well, the current system dictates that those with low credit ratings have limited to no access to reasonably priced credit, which instils inequalities and drives people into even more debt (through credit cards, overdraft accounts or the likes of payday lenders who charge exorbitant interest rates).

Offering a Solution for Employers

We are trying to solve the challenge of rising debt and lack of savings by partnering with employers, to offer employees fair access to financial products. We partner with not-for-profit Credit Unions who are member-owned and are the ethical solution to providing credit & savings accounts.

Get in touch to learn more about how we can benefit your team today!

A proactive approach to avoiding bad press in the Gig Economy

Gig economy work provides choice and flexibility. In theory, that is what self-employed workers want. But it doesn’t stop there.

Companies such as Uber, Deliveroo, TaskRabbit, and many others are responsible for providing over 1.3 million people with an income in the UK. Although we love the convenience and often cheaper prices these services provide, it is concerning to read the negative press around gig economy workers rights.

Several tribunals and court cases have demonstrated that gig economy workers aren’t self-employed, in the traditional sense. Under UK law, they are limb (b) workers, entitled to many of the same rights as employees, such as such as paid holidays, minimum wage and protection from discrimination. However, judges, the government, trade unions and the Taylor review all support the further strengthening of gig economy workers rights.

What can gig economy employers do?

Take action. As we have seen with Uber, local authorities can take action to shut down operations (in London and York, so far). Judges can also fine companies that fail to respect workers rights. Is a change in the law far away? One cannot be certain, which is why taking a proactive approach is the most sensible way forward.

For companies in this sector, now is the perfect time to take on these challenges proactively before it’s too late. Offer something new. Give freelancers another reason to use your platform and keep working with you, thereby solving another problem: high turnover amongst partners.

One of the main reasons people provide services through gig economy platforms is to boost income. Or get out of debt. Or start saving. Help them achieve these goals. We can help you do that, at no charge to you.

Increase savings, reduce debts: Support your teams

With a FairQuid Save As You Borrow loan, we use the point of borrowing to nudge people to save. Together with not-for-profit, member-owned partners, Credit Unions, we provide fair access to credit and help people get financially fit. Repayments and pre-determined savings amounts are deducted straight from salaries. Eligibility is based on length of service and performance with the employer thus rewarding loyalty to be used as a credit currency.

Our partner employers that are already offering these to their people have found that productivity and engagement are up, and turnover down. For those in the gig economy, this makes a huge difference for customers, since they will receive a better quality of service by highly valued workers. Everyone wins. And with a benefit rooted in the strong commitment to your people’s financial wellbeing, this should go a long way towards demonstrating which side of the employee rights debate your company is on. Contact us to learn more, today.

How to Save as you Borrow (as an Employee)

2 min read

Saving money isn’t easy. Especially when you’re juggling debts. Putting money aside for a rainy day isn’t something we, as a nation, are very good at anymore.

Since the recession, banks have encouraged consumers to borrow money. Interest rates are low, so why not treat yourself? Get a new sofa. A new car. Go to Spain. Buy that shiny gadget you’ve had your eye on for a while. Treat yourself. Treat the kids. Have fun! You only live once (YOLO).

Unfortunately, this mindset has, for millions of families, created an unhealthy relationship with money. For the first time in 30 years, UK households collectively spent more than they earned in 2017. Since over 16 million people have less than £100 in savings, how does one support all this spending? In one word: Debt

Low savings and debt: Impact on employees

Low levels of savings alongside debt is a toxic combination. It causes stress. A lot of it. With sleepless nights, one in four employees has struggled to perform at work due to money worries.

Ultimately, it’s felt at the workplace. Anxiety and stress can cause accidents and absenteeism. With struggling staff, it can also drag down productivity and most importantly – the overall well-being of your people.

Many think that financial stress is something of a taboo, especially at work. Team members aren’t likely to raise these issues with a manager or HR. This puts employers in an unfortunate position that they’re negatively impacted by problems they aren’t aware of and seemingly can’t do much to control or improve.

So what can you do, as an employer, to help your employees where they need it most?

Encouraging positive change

So we already know it’s tough to save when you’re steeped in debt. Without the safety net of savings, anything can go wrong, putting employees at risk.

When you’re looking for credit, there are many barriers to affordable access to credit. For one, your credit score history can leave you with nowhere else to turn but high-interest rate options such as credit cards, overdraft accounts and payday lenders.

It’s not all doom and gloom, though. We’ve got a solution! We enable loyalty and performance with the employer to be used as a credit currency.

What does that mean? Instead of historical credit scores, we measure the current length of service and performance to assess the eligibility of a loan. Using these innovative metrics, means we solve the problem of access to credit because our approval rates get up to 97%. There’s no point providing an employee benefit if it can’t benefit all your employees, right?

Couple this with an attached savings component which nudges employees to, ‘Save as you Borrow’, and voilà – we are changing behaviour for the future! And we really are. Most employees continue saving long after they have paid off their loan.

So how do we pull this off? Our partners are not-for-profit, member-owned, financial cooperatives. In short, Credit Unions. We connect employees to these ethical organisations through our platform, giving them access to the fair credit they deserve.

Partnering with responsible employers that want to offer a benefit that really matters, we are on a mission to bring fair finance to all. We want to put people back on track to saving, becoming debt-free, and being part of the co-operative financial community – one employee at a time!

Get in touch! Let’s be part of the movement to improve employee’s lives together!

Supporting Credit Unions through the #WorkNotWorry Campaign

Read time: 2 mins

Not enough savings and too much debt is a painfully stressful reality for millions of people across the UK. Credit unions are at the forefront of driving change and we, at FairQuid, are right beside them providing access to fair credit.

ABCUL (Association of British Credit Unions Limited) has launched the #WorkNotWorry campaign, with the aim to get more people to start saving and benefiting from credit unions. If you haven’t heard of them, credit unions are not-for-profit, member-owned financial co-operatives. Members (anyone who has an account with them), enjoy the same saving deposit scheme protections and services as high street banks but with better benefits. They can earn dividends, so when the credit union and local community does well, so do the members.

What causes worry at work?

Research shows that 46% of employees are worried about money, and 59% of those feel they’re not performing at their bestbecause of this stress. It doesn’t help that 1 in 4 are not getting enough sleep, which is understandable when 16 million adults have less than £100 in savings, according to the Money Advice Service (MAS).

Media stories about record levels of debt and people with not enough savings always sound like these are problems that happen in other companies, to other people. However, as we know from working with companies across the country, these problems have an impact on more staff than companies realise.

It’s a scary reality that millions of people, including those with families to support, are carrying more debt than they can afford and living one pay cheque to the next. Together with the employer, we can change this.

What can employers do?

When employees are caught in a vicious cycle of perpetual debt they need practical help. As money worries persist, team members can become less productive, take time off sick, make mistakes, and could start looking for another job.

In partnership with credit unions, we offer a practical solution through our innovative wellbeing platform. At FairQuid, both our employee financial wellbeing products have attached savings components whether you Save as you Borrow or Save with a Purpose. We have found that when nudged to save, the majority keep saving after the debt has been fully paid, changing behaviour for the future and working towards becoming debt-free. Combined loan and saving payments come direct from net wages, making it easier for people to budget without having to find spare cash for savings.

Most financial institutions only use credit scores to assess eligibility for credit. However, we know that doesn’t give everyone the fairest chance at accessing finance when they need it most. With our partner credit unions, we reward employee loyalty by assessing eligibility on the length of service and performance. This way, we give employees a way out of debt and into savings, changing long-term attitudes to money, and significantly reducing stress at work.

We believe in the power of the community to help each other and therefore are proud to support credit unions to increase their impact and raise awareness through the #WorkNotWorry campaign.

Want to support your team where they need it most? Join the FairQuid movement and help your staff to #WorkNotWorry! Contact us today.

Improve Your Employee Financial Wellbeing With Practical Solutions

Once known as a nation of savers, UK consumers are now more likely to use credit than savings for emergencies and other purchases such as holidays.

Savings are at the lowest levels since 1963. Over a decade of low-interest rates since the recession, have made it easier to borrow and reduced the benefits of keeping money in savings accounts.

Since the Office for National Statistics (ONS) started collecting data on borrowing in 1987, UK households became net borrowers in 2017. A worrying trend. It means the amount people borrow now exceeds the amount they’re depositing in bank accounts, pushing savings ratios to record lows, currently at 4.9% of their disposable income.

We’ve seen this before

High levels of debt, governments, banks and property companies encouraging people to buy houses, low levels of savings, and some economic uncertainty. It sounds too familiar, too much like the opening scenes of the world economic meltdown.

Brexit doesn’t help matters either, throwing a whole other set of uncertainties into the mix.

A debt charity, StepChange spokeswoman, said to the BBC “If we could shift that balance a bit, especially for lower income households, we could improve the financial wellbeing of many households and prevent many experiencing problem debt.”

An accessible emergency savings fund of £1,000 per household would lift 500,000 out of problem debt. People could use savings when necessary, instead of turning to predatory lenders.

Can and should employers help?

Yes, but that doesn’t necessarily mean you need to lend money to staff or increase wages. Companies can only afford salary increases in-line with their own budgets and revenue forecasts. Lending money comes with huge challenges and implications so isn’t always advisable either.

Financial education, although well-meaning, only goes so far and fails to tackle the real problem: Managing too much debt and not enough savings. Companies rarely get much of an ROI from such programs, and employees don’t feel the benefits.

Offering practical solutions, for a practical problem, is the way forward. FairQuid Employee Wellbeing Solutions are a practical solution that is proving popular amongst employees at companies we are working with. Members of your team can gain access to loans (with automatic, built-in savings accounts) from Credit Unions.

Not only do these services reduce employee financial stress, it means they can start saving straight away.

With debts reducing and savings growing, employee absence, time off due to stress, and turnover, reduces. Be a responsible business and join us to support employees to become debt-free, today.