Uniting the Fight Against Britain’s Personal Debt Crisis

During the 1980s the Tories gave a mighty shove to the ongoing crisis of social housing facing the British public by introducing their destructive Right to Buy scheme. In order to cash in on the sale of former council houses, wealthy lenders quickly set-up businesses in order to profit from the repossessions that, all too often, were generated by people taking up the option of their Right to Buy. This terrifying story has been laid bare by local researcher Damon Gibbons in his book Britain’s Personal Debt Crisis: How we got here and what to do about it (2014).

“Typical of the lenders operating in this way were Citi Mortgage Corporation and National HomeLoans, which launched their operations in the UK in 1985. These lenders targeted their marketing to council tenants, offering mortgages with no need for a deposit; at high loan to income ratios, and even lending to people with existing rent arrears. In effect, these lenders turned Right to Buy into an asset stripping exercise – when borrowers defaulted the home was repossessed and the lender pocketed the discount on its market value, while the household was left homeless and in many cases had to apply to the local council for rehousing.” (p.43)

Citi Mortgage Corporation which is owned by the world’s biggest bank, Citigroup, of course played a major role peddling such toxic mortgage products that ultimately helped cause the ongoing financial crisis. Last year Citigroup was even fined $7 billion (the largest civil penalty in history), although really it was just a slap on the wrist considering the immense profits they had already generated from their criminal activities.

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The other company mentioned by Damon that was set up in 1985 to profit from such enforced human destitution was National HomeLoans, which is now known as the Paragon Group of Companies. Nigel Terrington, their current CEO, joined the group in 1987, and has been amply rewarded for his service to the rich by an appointment on the Bank of England’s residential Property Forum. Another Paragon high-flyer is the longstanding bankster Fiona Clutterbuck, who in addition to residing upon Paragon’s board of directors, is a senior executive at the Phoenix Group, which is one of the largest providers of insurance services in the UK.

Here it is important to note that the Phoenix Group is something of a hub for powerful ruling-class predators, and just last year Phoenix’s former Finance Director, Paul Miles, joined the infamous payday lender Wonga as their Chief Financial Officer. Both Mr Miles and the current Wonga chairman, Andy Haste, both having recently served in top positions at the multinational general insurance company RSA Group (formerly Royal and Sun Alliance). Fittingly Mr Haste is also a board member of ITV, whose employees displayed their anger at ITV’s greedy habits by going on strike earlier this week in opposition to the paultry 2% pay rise they were offered. It was clear to all that ITV could have been able to offer more as the “company’s pre-tax profits – including exceptional items – rose 39% to £605m for 2014.”

The RSA connection with Wonga reinforces the links between profit hungry insurers/payday lenders and property tycoons, as the current CEO of RSA is the former head of the British Land Company — one of the largest property development and investment companies in the UK.  Likewise, another current RSA board member is veteran property investor Malcolm Le May, who in addition to being the former Co-head of banking for Barclays in New York, is a board member of notorious personal loan company Provident Financial.

Peter Crook, the appropriately named former UK Managing Director of Barclaycard is presently the CEO of Provident Financial; while Provident Financial’s chair, Manjit Wolstenholme, is a board member of Unite Students, which is the “UK’s leading manager and developer” of overpriced student accommodation. These relationships should not be too unexpected because, as Damon Gibbons explains in his book, “banks have been complicit in the expansion of high cost credit in two ways.”

“Firstly, it is clear that the failure to provide low cost overdraft facilities to people on low incomes, and the practice of charging high fees for bounced direct debits and for unauthorised overdraft facilities, have prompted many to turn to the payday and high cost lending sector for credit. Secondly, banks have been investing in the expansion of high cost lenders. Barclays Bank is part of a consortium which provides Dollar Financial (which trades in the UK as The Money Shop) with a $235 million credit facility.” (p.189)

To re-emphazie this point, the Guardian newspaper has previously pointed out how:

“In many countries, charging interest rates as high as companies such as Wonga and Provident do would be illegal, but the paradoxically named Office of Fair Trading has concluded that there is no need for such drastic measures here. And do not underestimate the scale of this problem – Provident has almost £1bn in subprime loans out on the streets of the UK. Perhaps George Osborne should be clamping down on Crook and his cronies rather than kicking people off incapacity benefit.”

Such attacks on the working-class, which Damon Gibbons and his colleagues have defiantly fought to bring to public attention (for the past fifteen years through their Debt on our Doorstep campaign), were eventually taken up in The Daily Mirror’s End Legal Loan Sharking campaign. Here an article published in 2012 observed how Provident has doorstep collection agents in most British towns and cities with a typical £200 loan costing £320 over 32 weeks (97.5% per annum).

Today, Provident’s web site proudly boasts of their serving (ripping-off) around 2.4 million customers! According to their 2014 annual report dividends shared amongst Provident’s shareholders last year were £123.4 million, which marked an increase of £15 million in profits from the previous year. Such profits of course have been born on the back of Provident’s low paid workforce who travel door-to-door offering their unholy wares to the poorest and most vulnerable people they can find.

Unfortunately although many excellent suggestions have been generated by Damon Gibbons and his associates in their fight against predatory lending practices, to date very little has changed — hence the need for his book. Damon realises the extent of this problem as much as anyone else, and recognises that what is needed more than ever is a new re-energised mass movement of the working-class, which is also represented by a political party that will consistently fight for their interests — one like the Trade Unionist and Socialist Coalition.

In building this new movement the 99% can take a inspiration from the recent strike taken by workers at ITV, and by successful industrial disputes here in Leicester, like those recently concluded at the Trelleborg engineering factory, and at Gateway College. This is because, as Damon concludes:

“In the final analysis, we need to control the financial sector, and restore it to its rightful place as as servant of government economic policy. We cannot prosper as a nation if our economy is reliant on household consumption and ever-increasing levels of personal debt. We have to direct more resources into creating much more sustainable economic foundations. Those resources must come from our banks. They will not be willing to create their own competitors and relinquish their dominant position. We will have to make them do so.” (p.219)

Further Reading

Paul Kershaw, “Private sector rents and Labour: It’s a mad, mad, mad, mad world!“, The Socialist, May 7, 2015.

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