‘Credit where credit’s due?’ – A new research report on high cost credit in Wales

Date: 24 May 2016

(For the Welsh language version of the summary report please click here)

(Press release for the Credit where credit’s due? launch at the House of Lords can be found here.)

Over 12 million people in the UK do not have access to affordable credit. An estimated 16.8 per cent are over-indebted. In Wales, the proportion is higher in every single local authority area with three among the UK’s top 10 most over-indebted localities.

A new report by The Young Foundation, ‘Credit where Credit’s Due?’, calls for real change to address this issue by improving access to affordable credit and providing people with the skills and confidence to make positive financial choices.

The report, which is being launched at Cardiff University on 24 May, has been commissioned by the Public Policy Institute for Wales as part of its work on tackling poverty and is funded by the Economic and Social Research Council.

Victoria Boelman, Lead Researcher of the report said, “We take access to affordable credit for granted but in reality this can be a major challenge for many households, leading them to turn to high cost alternatives.

“High cost credit customers come from all walks of life but they are mainly young families. They are equally likely to be employed as non-customers but are generally on low incomes.

“We found customers borrow for a range of reasons including everyday living, Christmas and birthday presents, holidays, moving house or major events. Around 27 per cent will take out their first high cost loan because of life shock such as a bereavement, break up or birth of a child.

“Six per cent of the Welsh population have used one or more of rent-to-own stores, home credit and payday loans in the last year. In recent years the attention has focused on payday loans but home credit and rent-to-own have largely escaped scrutiny despite being more prevalent and often more expensive. Sixty five per cent of high cost credit users turned to this option from the outset and do not compare offers between lenders.

“The prevalence of high cost loans in the community has a major impact. The majority live in communities where this type of borrowing is ‘normal’. Around 70 per cent think borrowing from a doorstop lender is common in their community. Family and friends often make recommendations and referrals between themselves.

“The cycle of debt is further reinforced by some lenders themselves, particularly home credit agents. They encourage new loans when customers have almost paid of their debt or shortly afterwards. Over 35 per cent have taken out another loan when offered.

“There are alternatives such as borrowing from a credit union or loans from friends and family. Only a third of those researched considered these alternatives. Many of those who borrowed from a credit union originally borrowed from a high cost credit lender.”

Professor Steve Martin, Director of the Public Policy Institute for Wales said, “High interest credit is an important issue in Wales, as well as the rest of the UK. We welcome this report which puts forward positive steps that can help to break the cycle of indebtedness that afflicts so many households and communities.”

Glenys Thornton, CEO at The Young Foundation said, “This report is an important look at how high cost credit impacts on social wellbeing. The money that is spent paying back high cost loans could be invested into activities that boost standards of living and local economies.

“Fifty per cent of the people who take out high cost loans experience anxiety and stress as a result of debt. If the debt becomes unmanageable it can have a significant impact on quality of life of individuals and families and in some cases on the life chances of children.”


Notes to Editors:

  • A full copy of the ‘Credit where credit’s due? Understanding experiences of high cost credit in Wales report is available at The Young Foundation website http://youngfoundation.org/projects/finding-alternatives-payday-lenders/
  • The Young Foundation harnesses the power of social innovation to address the structural causes of inequality. We believe that current levels of inequality are not inevitable and that we collectively have the power to shape the societies and communities we want to live in. Our work is based on research, partnerships and practical problem solving. We work with civil society organisations, business and the state to achieve change www.youngfoundation.org
  • The Public Policy Institute for Wales was established in January 2014. It is a member of the UK’s network of What Works Centres and works directly with Welsh Ministers to identify their evidence needs and provide them with access to independent authoritative advice and analysis. Among other important topics, it is leading a programme of research on What Works in Tackling Poverty. In addition to the Young Foundation’s work on high interest credit, this programme is providing evidence on:
    • Approaches to reducing rural poverty
    • How to harness growth sectors to tackle worklessness and in-work poverty
    • The ways in which housing providers can address poverty among young people
    • Innovative approaches to measuring poverty.

For further information see www.ppiw.org.uk and follow us on Twitter @ppifw.

  • The Economic and Social Research Council (ESRC) is the UK’s largest funder of research on the social and economic questions facing us today. It supports the development and training of the UK’s future social scientists and also funds major studies that provide the infrastructure for research. ESRC-funded research informs policymakers and practitioners and helps make businesses, voluntary bodies and other organisations more effective. The ESRC also works collaboratively with six other UK research councils and Innovate UK to fund cross-disciplinary research and innovation addressing major societal challenges.The ESRC is an independent organisation, established by Royal Charter in 1965, and funded mainly by the Government. www.esrc.ac.uk



The ‘Credit where credit’s due’ report is based on research conducted in Wales in 2015. The Young Foundation took a mixed-methods approach combining robust survey data with deep qualitative insights:

– A nationally representative survey of 1,000 members of the Welsh population (conducted in person, June 2015).

– A survey of 134 customers of high cost credit and/ or credit unions across Wales (conducted in-person, October 2015).

– In-home depth interviews with 24 high cost credit customers.

– Nine focus groups with 77 high cost credit and affordable credit customers.

– Telephone interviews with 26 expert stakeholders.


Our research focused on three kinds of credit – home credit, rent-to-own and payday loans.

  • Home credit – Often known as doorstep loans, repayments on cash loans are collected by an agent from the customer’s home. Leading home credit lenders include Provident and Morses Club.
  • Rent-to-own – Sometimes referred to as hire-purchase, the customer typically pays a weekly amount for a fixed term. At the end of the term the customer owns the product but until that point it is only leased, allowing the customer to return it if they wish, or the lender can repossess the goods if payments are not made. Leading providers include Brighthouse, Perfect Home, Family Vision and Buy-As-You-View.
  • Payday loans – Payday loans are a form of short-term credit, typically for small amounts of money. They are available online and in high street shops. Interestingly our research found that payday loans were not perceived well due to the pre-cap market, reinforced by media portrayals and past experiences. Payday loan lenders include Wonga, Quick Quid and Sunny.

For more information please contact:

Charlotte Heales on 07917 807 050 or charlotte.heales@youngfoundation.org

Glenys Thornton on 07961 844 165 or glenys.thornton@youngfoundation.org


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