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The nasty world Vickers missed

In his banking review, John Vickers said there isn’t enough competition among high street banks. He

Doorstep lending and loan sharking is causing misery for thousands of people across the country right now, but a small credit scheme is fighting back in east London and it has had some good news.

Fair Finance, based in Stepney, has raised £1m for its loan book from Société Générale and BNP Paribas so it can offer loans to poor families that are at the mercy of doorstep lenders and loan sharks – no collateral required.

It was set up five years ago by Faisel Rahman to provide funds to those typically rejected by the banks. They typically borrow up to £500 for items such as a new oven or school uniforms.

Fair Finance runs repayment over about a year and charges an annual percentage rate of 44 per cent. It helps customers set up bank accounts and encourages the reporting of loan sharks to the police. Its default rate is just 7 per cent and the company now employs 12 people.

This system of microlending is similar to that of the Grameen Bank, started in Bangladesh by the Nobel prizewinner Professor Muhammad Yunus, now sadly battling opponents of his own after being forced to retire as Grameen's head.

The problem in the UK is that people rejected by banks as being too high a risk resort to doorstep lenders, who bring the cash to your door but charge up to 2,500 per cent. This is big business.

There are two problems at work here. The Competition Commission has warned that there aren't enough lenders prepared to take on the high-risk market (otherwise known as "poor people"). And loan sharks are flourishing because enforcement rules aren't tough enough.

But the Labour MP Stella Creasy has been steering a private member's bill through parliament. The Consumer Credit (Regulation and Advice) Bill was parked in February; however, it will return in October. Here's more about the whole issue in detail.

Trading Standards officers across the country want the bill to become law so that they can work with the police to take on the worst offenders they know by name. Doncaster has been doing some great work this way.

But, on this issue as usual, the anti-regulation-more-red-tape brigade can't see the wood from the trees.

Trading standards officers are council officials, so it would be a big help if the Communities Secretary, Eric Pickles, backed the bill. Think it through and there's an efficiency saving here which also prevents people falling into deeper problems.

But will Pickles get involved? He may need a little gentle persuading. So why don't you email him and try a bit of "nudge" behavioural change?