A major study conducted by the Young Foundation and funded by the Economic and Social Research Council investigating the use of high cost credit in Wales. The research was carried out throughout 2015 with the final report - Credit where credit’s due? Understanding experiences of high cost credit in Wales – published in May 2016. An estimated 12 million people across the UK lack access to affordable credit, something the majority take for granted in everyday life. The alternatives for many are high cost lenders – payday loans, doorstep lenders, or expensive rent-to-own stores on the high street. This financial exclusion is harmful to individuals and families, our communities and the wider economy. Objectives: We set out to understand the scale of the issue, pathways into and journeys through high cost credit, and the impact this has. We aimed to identify opportunities and offer suggestions for new and improved products, services and ways of engaging consumers – and to outline what might work as alternatives to high cost credit. Key Findings: • 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. • Customers come from all walks of life but are most likely to be young families. • Reasons for using high cost credit range from paying for Christmas or buying new items for the home, to simply paying the bills and making ends meet. For most, these represent essential purchases. • The majority of people turn straight to high cost credit without considering different types of credit or comparing offers between lenders. • High cost credit customers are typically extremely aware of their income and outgoings, often using ‘jam jar’ and other informal money management solutions. • Many see high cost credit options as being ‘for people like me’ and one of a very limited set of financial options. • The majority of high cost credit customers live in communities where these types of borrowing are normal. • Home credit providers especially are in a strong position to encourage repeat borrowing. • Customer perceptions of payday loans still firmly reflect the pre-cap market. • By contrast, rent-to-own and home credit have largely slipped through the net of negative publicity. • Regulating all forms of high cost credit out of existence is not the answer. • There is a clear need for market growth in the affordable credit market.

The Young Foundation took a mixed-methods approach combining robust survey data with deep qualitative insights: (1) A nationally representative survey of 1,000 members of the Welsh population (conducted in person, June 2015). (2) A survey of 134 customers of high cost credit and/ or credit unions across Wales (conducted in-person, October 2015). (3) In-home depth interviews with 24 high cost credit customers. (4) Nine focus groups with 77 high cost credit and affordable credit customers. (5)Telephone interviews with 26 expert stakeholders. The research focused on three kinds of credit – home credit, rent-to-own and payday loans. (1) 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. (2) 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. (3) 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.