25/11/05

Media Contact: Robert Davies 020 7393 2160

Ref: 96/05

Cashless society leaves financially excluded more at risk, warns Housing Corporation

Millions of people are now more vulnerable to unscrupulous lenders than in the past, because they do not have access to a bank account, according to a new survey published today.

70% of adults believe it is now more important to have a bank account than it was five years ago, reveals the survey by the Housing Corporation. Yet nearly 3 million people in Britain still do not have access to any banking services 1.

Since 1995 over 3,100 bank and building society branches have closed 2, leaving Britain's most deprived communities even more cut-off from mainstream providers of financial services. Despite the introduction of basic bank accounts and Post Office access to banking services, millions of people still suffer financial exclusion, including being forced to turn to doorstep lenders and loansharks for finance.

1 in 12 of those questioned admitted suffering financial exclusion as an adult, with 1 in 5 then turning to a doorstep lender to plug the gap. Interest rates charged by doorstep lenders frequently rise above 400% APR -- further penalising those already facing financial ruin.

7% of the respondents who had suffered financial exclusion even lost their home as a direct result of their situation.

Respondents cited the recent trend to pay more benefits and wages via bank accounts as one of the main reasons why it is more difficult to live in the UK's 'cashless society' without an account. This makes it harder for people without banks to receive money to live, let alone find insurance or affordable credit. Saving money through direct-debit bill payment is also impossible.

To tackle the issue, the Housing Corporation is launching the Money Access Programme, which will encourage social landlords to fill the void left by the retreat of mainstream financial service providers from many communities.

Jon Rouse, Chief Executive of the Housing Corporation, said:

"Housing associations and other social landlords are not just there to collect the rent. They can help ease the stress that people face when they have little money to live on and urgent bills to pay.

"Social landlords are offering the advice and support to help marginalised people gain bank accounts. They are supporting credit unions and other community finance initiatives, offering help to people who might otherwise pay hundreds of pounds in interest to doorstep lenders. While these initiatives are only the beginning, they offer real hope for the future."

The Corporation has also highlighted the existing good work by Associations in this field with the report "Community Access to Money: Housing Associations Leading on Financial Inclusion", also published today. Produced by the Community Finance Solutions Unit at Salford University, the report details a range of initiatives being operated across the country, illustrated by case studies, as well as key learning points. A copy of the report is available from the Housing Corporation website www.housingcorp.gov.uk

Ends

Notes for Editors:

1. The most recent Family Resources Survey (FRS) quoted by the Treasury's report Promoting Financial Inclusion (December 2004) shows that around 8 per cent or 1.9 million households in Great Britain were without access to any kind of bank account, equating to around 2.8 million adults.

2. Mintel, (2004). 20% of all branches open in 1995, had been lost by 2002.

3. The Housing Corporation is the Government agency responsible for regulating and investing in nearly 2000 housing associations in England. Its current investment programme of £3.3bn for 2004-06 is funding over 63,000 affordable homes. 16 348 of these will be for key workers and 25% will use some form of modern method of construction.

4. The Housing Corporation's consumer research:
1731 adults were polled by ICM on their attitudes to banking and financial exclusion. 70% said that access to banking services was more important to managing modern life now than five years ago, 22% knew someone who had no access to mainstream banking services and 1 in 12 had themselves been financially excluded at some time. Further information is available in a briefing paper from the Housing Corporation.

5. The Money Access Programme:

The aim of the Housing Corporation's Money Access Programme, launched today, is to help housing associations and other social landlords do more to tackle financial exclusion through:

• Highlighting good practice initiatives across the sector.
• Promoting the business case of financial inclusion work.
• Developing a financial inclusion toolkit.
• Raising awareness of the £120 million Financial Inclusion Fund set up by the Treasury to support initiatives to tackle financial exclusion.
• Running a series of events on tackling financial exclusion for social landlords.

6. Work by housing associations

Services provided by housing associations now include face to face debt advice, practical help with benefits and accessing basic accounts, credit union services and a whole range of affordable finance options.