Pawnbrokers have been offering loans to working class people who have been carved out of mainstream financial services for generations.
Charles Booth was a researcher who produced “poverty maps” of London showing how the poor lived just a stone’s throw away from the rich. In 1897 he noted, “Sunday clothes are put into the pawnshops on Monday and retrieved on Saturday.”
But pawnbroking, cheque conversion and doorstep loans have been booming in recent years, feeding off poverty and inequality.
Figures from the National Consumer Council show that one person in five is forced to borrow from pawnbrokers, cheque cashers or loan sharks — at an average rate of 177 percent.
Research by the New Economics Foundation (NEF) in 2002 found that loans offered on the doorstep could “easily amass interest and charges in excess of 1,000 percent”.
The research quoted figures from industry analysts Datamonitor, showing that 8.3 million people were denied mainstream credit.
Their poverty is big business, making £2 billion a year for the alternative moneylenders. Just four major firms snap up nearly 70 percent of the business.
“Predatory lending is one of the worst excesses of the free market economy,” the NEF report argued. It is “systematically stripping the wealth and assets of some of the country’s poorest neighbourhoods”.
Debt problems are soaring. Citizens advice bureaux saw 1.4 million new cases where people were in trouble with debt in 2003-4 alone.
Average household debt in the UK is approximately £7,463 — a figure that excludes mortgages.
Even people who are not forced to use pawnbrokers have debt problems. More than one in ten people have problems meeting their credit card repayments.