Discover an initiative of the People’s Bank scheme to clear £1 million of payday loan debt. Find out what happens to payday loan debt and how the pair from People’s Bank plan to achieve their goal.

What you’ll read in this article from Payday Loans Net:

  • How much ‘bad’ debt there is in the UK
  • What happens to ‘bad’ debts
  • The role of the People’s Bank in Waltham Forest
  • How the People’s Bank fund their scheme
  • Conclusions

How Much ‘Bad’ Debt Does People’s Bank Scheme Need to Tackle?

Ever since the FCA made radical changes to the payday loan industry, there is much less ‘bad’ debt than there used to be. The departure of unscrupulous lenders from the market and stricter affordability criteria help to ensure that fewer borrowers take out short term payday loans that they can’t afford to repay. Despite these precautions, there are always borrowers who default on their loans and can’t cope even when their lender shows forbearance, and an affordable repayment plan is put in place. Often their struggles are through no fault of their own. Perhaps a change in their personal circumstances have left them unable to pay – however much they would like to. So what happens to this estimated £8 billion of ‘bad’ debt from payday loans and other credit agreements?

What Happens to ‘Bad’ Debts?

Once it becomes obvious that the debt is too hard to repay, many lenders make the decision to cut their losses and sell them to companies which specialise in collecting on bad debts. They are sold at a fraction of their worth, sometimes as little as 10p for every pound of debt. These third-party debt collectors then attempt to recoup their losses. Even if they only manage to retrieve 20% of the debts, they could make as much as £800 million.

The FCA has expressed concern about the tactics employed by such debt collectors. In November 2016 the company Motormile Finance UK was ordered to write off £414 million in ‘bad’ debts owed by 500,000 borrowers because of the methods they’d employed and their lack of ‘due diligence’ in checking that the outstanding debt was correctly recorded. It is worth noting that PDNET currently does not use such companies to retrieve debt from new loan companies.

So, what initiative is the couple from Waltham Forest planning, and how will they fund their purchase of ‘bad’ debts?

The Role of the People’s Bank in Waltham Forest

The Walthamstow-based People’s Bank is run by two artists and entrepreneurs, Hilary Powell and Daniel Edelstyn. Their plan is to use the profits they make from selling their artwork to buy up discounted ‘bad’ payday loans and then wipe the debts out. They also plan to notify the loan defaulters so that they can rest assured that they are no longer in debt. In this way, they hope to help locals out of their financial difficulties.

How the People’s Bank Scheme gets Funding

Ms Powell and Mr Edelstyn have received support by Waltham Forest Council. They gave them an initial donation of £6,500 at the start to get their scheme off the ground. Waltham Forest Council also encourages other local investors to make contributions.

Apart from this donation, they sell works of art which resemble banknotes. These are available in denominations of £5, £10, £20, £50, £100 and even £1,000, and both museums and private individuals are expressing interest in purchasing these Walthamstow printed notes. Of the proceeds, a percentage is donated to local community projects such as homeless shelters, food banks and fund-raising schemes for primary schools in the area. The rest is put towards their fund to purchase ‘bad’ debts.

Apart from their artwork, Mr Edelstyn is producing a full-length feature film about their scheme. The couple also produce a ‘How to’ guide which explains how people in other parts of the country can establish similar schemes.

So far, they have managed to raise nearly half (£20,000) of their projected £50,000 target, and hope to be able to buy the £1 million of debts very soon.

Conclusion – The Initiative of the People’s Bank Scheme

Any initiative which helps people in debt is to be applauded. Cynics might comment that by the time People’s Bank scheme gets hold of the bad debts, the damage has been done. In other words, borrowers have already paid out a fortune in interest and additional fees, and their credit rating has been affected accordingly. However, this view perhaps underestimates the psychological pressure and stress that loan defaulters feel when they have outstanding debts. This scheme will put their mind at rest.

It is heartwarming to hear of people doing something for others and expecting nothing in return. Ms Powell commented that such community schemes bring people together and rightly added, if you waited around for other people’s permission and money, you would end up not doing anything.

Olly Landsman

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