Kindness alleviates worst effects of credit crisis

17 August 2012

THE five years since the start of the credit crunch have seen an "outpouring of kindness" for those in need of help, says Christians Against Poverty (CAP), the debt counselling charity. It reports that its church-based centres have almost quadrupled in number since 2007, from 56 to 205.

"The credit crunch has been good in helping people recognise the needs of the very poorest, which were there before 2007, but are ow more widely understood, and prompt us all to respond with what we can do where we are," the chief executive of CAP, Matt Barlow, said.

Thursday of last week was the fifth anniversary of the European Central Bank's releasing of €95 billion of liquidity to prevent borrowing costs from spiralling. CAP reports that, since then, 36 per cent more of those whom it helps say that unemployment is the main reason for their debt crisis. Figures for July show an unemployment rate of 8.1 per cent, equivalent to 2.58 million people. Unemployment peaked at almost 2.7 million at the end of 2011, its highest level for 17 years.

Mr Barlow said on Monday that, in addition to unemployment, CAP had observed a "squeezing" of the credit market, which was "in a sense, not always a bad thing. . . Making credit easily available, lending money without proper due diligence done - the way that banks tore up all of their previous underwriting policies - has been disastrous for our nation."

He expressed concern about the rise of pay-day loans, under which small amounts of money are lent at a high rate of interest, and where approval can be given online "within seconds".

The Government has responded to concerns about such loans by giving the Office of Fair Trading power to put an immediate stop to the operations of rogue money-lenders, debt collectors, and debt-advice firms, and also by working with trade bodies to produce a new code of practice.

It has, however, opposed calls, including those from the Depart­ment for Business Innovation and Skills, to take further action. The consumer organisation Which? described the code of practice as "a rebrand of many of the existing rules that have been flouted by some unscrupulous lenders for years".

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