General Insurance Article - Access to financial products denied during pandemic

New research by Royal London reveals that the pandemic has adversely affected consumers’ ability to access basic financial products. As our figures show, taking out personal loans, credit cards and overdrafts has become more difficult, and many people are turning to the benefits system, often for the first time.

 Since the virus hit in March, 12% of UK adults have applied for a credit card, personal loan or an overdraft/overdraft extension, with credit cards the most popular form of borrowing at 8% (other forms included store credit and car loans).Withrecent figures from the Office for National Statistics showing redundancies at a record high and fears growing over what will happen when the job furlough scheme ends, borrowing may feel like the only option for some people. 

 However, more than one in five adults (21%) who have attempted to take out a financial product during the past nine months said they were not satisfied with the total cost. Some 18% were dissatisfied with the ease of contacting financial organisations, and 16% were not satisfied with the length of the process.

 One respondent said: “I was turned down by my bank of 20 years for an overdraft even though £6,000 a month goes through [my account].” Another commented: “Even though we had £600,000+ equity in our property, to borrow an additional £25,000 took weeks of telephone consultations with our mortgage provider and the whole process from start to finish took four months due to wariness on their part about meeting their financial criteria and because of Covid delays.”

 Of the 17% who had their application for a personal loan, credit card or overdraft declined, nearly half of them (46%) said it was the first time they had been turned down for a financial product. The most common product rejections were credit cards (42%), followed by personal loans (25%) and overdrafts (18%).

 As for government benefits (including Universal Credit), 44% of people who applied for benefits did so for the first time during the pandemic, rising to 51% for managerial, professional and supervisory occupations. Nearly one in five (19%) had some of their benefit applications rejected while 11% had all of their applications rejected.

 A survey respondent commented: “We appear to have fallen through the gaps and are not eligible for any support.” Someone else said: “It felt like I’d done something wrong by asking for help.” And: “It was humiliating in my sixties to have to ask for help.”

 Sarah Pennells, Head of Financial Capability at Royal London, said: “This year has been incredibly difficult for everyone, not least because many people have experienced an unexpected change in their financial circumstances. For some of them, it’s been made worse by the fact they’ve been turned down for products such as personal loans and credit cards – often when they’ve never had a problem before. In addition, many are trying to navigate the benefits system for the first time and are not always given the help they so desperately need.

 “If you are worried about money or debts, please don’t suffer in silence. There are lots of places you can go for help and advice, including Turn2us, Citizens Advice, Money Advice Service, and National Debtline.” 

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