Financial exclusion
What it is and the effects
People are financially excluded when they do not have access to
a bank account or affordable credit or do not have the skills to
manage their money effectively. The effects of being financially
excluded reach every area of life and impose extra costs on the
most vulnerable residents of our district.
Employment: Not having a bank account can make
it difficult to arrange for wages to be paid, which may reduce the
chances of finding a job.
Affordable credit: People who do not have a
credit history or a bank account can have difficulty accessing
affordable short-term credit. This can encourage money lending with
extortionate interest rates and loan charges. Provident, a doorstep
loan company with interest rates as high as 497.4% has a strong
presence in the St Radigunds and Tower Hamlets areas of Dover as
well as Aylesham and Elvington. Reports of loan sharks
operating in these areas have also been received. Information on credit sources available to those on
a low income.
Utilities: Many deals for mobile phones and
discounts on utility bills and insurance policies are only
available for payment by direct debit.
Higher charges: Without a bank account basic
functions like cheque cashing results in charges at cheque cashing
centres. These charges can be as high as 10% of the value of the
cheque plus an administration fee.
Theft: According to the
New Policy Institute 2009 report, households who do not
have home contents insurance are more than three times as likely to
be burgled as those with insurance. In 2007/08, around 6 per cent
of households without insurance were burgled, compared to 2 per
cent of households with insurance.
Half of the poorest households do not have home contents
insurance, the same as a decade ago and more than twice the rate
for households with average incomes.
Low cost insurance is usually only available if payment is made
by direct debit.
Health: People who experience the stress and
pressure that being in debt causes may develop health problems
alongside the practical consequences of debt such as inability to
afford to eat healthily or to adequately heat their home.
Relationships can also suffer. There has been an increase in mental
health issues and suicides in Dover linked to the recession and
debt. Training has been delivered to Dover District Council front
line staff and free interagency training can be arranged by the
National Health Service.
For many families debt means that substantial parts of their
weekly income are spent on repaying loans, usually for everyday
purchases such as food, petrol or clothing. Debt problems can arise
when people experience changes in their circumstances, which then
leave them unable to meet their commitments, for example the loss
of a job, a birth, ill health or bereavement. They can suddenly
find themselves without access to banking services or affordable
credit and possibly do not know how to apply for products or manage
their finances. Debt can be devastating and can make people feel
ashamed, guilty, frustrated, and angry which can seriously affect
both their mental and physical health. On a practical level,
people's liberty, their home, goods and services may be lost or at
risk. Free, impartial debt advice is essential to help people lift
themselves out of the cycle of debt. Details of the debt and money management advice
currently available.
The knock on effect is that, with less money available, the need
for goods and services diminishes which places a greater strain on
local businesses. The Voluntary and Community Sector also suffer
with fewer volunteers and available funds and a greater demand for
their services.
Contact Community Development
Tel: 01304 872061
Email: communitydevelopment@dover.gov.uk
