27th February 2019

Ethical lender hits 4000 households milestone

A North East-based credit provider is now helping 4000 low income households access affordable loans for vital household goods, after seeing a 50% increase in demand for its services and reaching its three-year £3m loan-out projection in just 18 months.

Headquartered in Durham, not-for-profit Smarterbuys Store which is authorised and regulated by the Financial Conduct Authority, was originally set up in 2012 in a partnership between an ethical community bank and established housing associations.  Originally aimed at working alongside UK social housing landlords to give their tenants access to cheaper credit for white goods, TVs and furniture, in 2018 the business announced that it was expanding its offering to market directly to all consumers on lower incomes.

Vicky McCourt, chief executive at Smarterbuys Store said: “The surge in demand for our services shows that people on lower incomes who are excluded from mainstream credit are becoming increasingly savvy about shopping around for affordable, responsible credit sources before they commit to a loan.

“Our business plan was focused on loaning out £2m in three years, so having exceeded that, and doing it in half of the projected timescale is a big milestone for the team.

Extending our offering to anyone on a low income, not just social housing tenants, has resulted in a 4000-strong customer base, of whom 68percent complete their loans either on or before time, which is much higher than the industry average, and which helps borrowers build a good credit record.”

Sarah Johnson, xx, has accessed vital household goods through Smarterbuys Store for the last three years and believes more people should be made aware of the affordable credit available:

“I first learned about the service that Smarterbuys Store offers from my council housing association.

I have eight children, one of whom has additional needs and requires my full-time care meaning I’m unable to work. I rent an end terrace and over the years Smarterbuys Store has enabled me to be able to purchase numerous essential household items so that I can provide a good home for my family. Items have included a washer, dryer, refrigerator, cooker, beds and wardrobes and I am able to repay an agreed amount per month in line with what I can afford.

It would be amazing to purchase these household goods outright, but their expensive nature has always made this impossible. I hated the idea of paying back extortionate amounts in interest through other credit lenders and the worry would keep me up at night.

The affordable credit offered Smarterbuys Store really has allowed me to rest easy, knowing that if there are any problems with my finances, I can speak to them about adjusting my repayment schedule without any penalties.”

The charity says it believes there are several factors behind the increase in the amount of credit it has been able to extend.

“As a not-for-profit business we can make sure our rates are consistently cheaper than the market alternatives, and our agreements are for two years rather than the commonly offered three or four years, in which borrowers end up paying more. If our customers have difficulty or are on Universal Credit, we can extend their loan without any extra cost,” explained Vicky.

We refuse to do so called offers that encourage people to make an application just to get a sale. We would much rather people make considered purchases and we will always provide the best price we can.

Our business is also unique in that the Save as You Pay Scheme means our borrowers are guaranteed cashback at the end of the agreement. This is the first opportunity to save money that some of our customers have ever had, which in itself helps them become more financial capable and resilient.”

The rent-to-own sector faces a shake up from April 2019, after the Financial Conduct Authority (FCA) previously ordered retailers like BrightHouse, Buy As You View, and Perfect Home to repay almost £20m to over 250,000 customers, following a ruling that they had not been lending responsibly, and forcing a reduction in total pricing from April.

SmarterBuys Store says it welcomes the Financial Conduct Authority’s plan to introduce a price cap on interest rates and should save consumers around £22.7m a year in excessive charges.

“We look forward to seeing the exact details of the proposals, but we are right behind the principle of more protection for financially vulnerable people, who in some cases can end up paying four times the retail cost of a product from unscrupulous lenders.”

Added Vicky.

“There are some concerns among ethical lenders about how the new cap can be made to operate in the best interest of the rent-to-own borrowers. For instance if the profit margin for the lender is reduced, people on low incomes could eventually have even less choice and may be driven to borrowing from doorstep lenders and those operating outside the law, pushing them deeper into debt.”