British supermarket offers customers food loans, and they line up in the thousands

0

Tens of thousands of requests for an installment payment plan have poured into a UK budget grocery chain just two weeks after its launch, as a cost of living crisis crushes UK household incomes.

Iceland Foods customers have sent around 60,000 applications so far, more than the total number of loans the credit provider behind the initiative is expected to offer in 18 months. Successful applicants can borrow up to £100 (just under R2,000) to pay for food at one of its outlets.

As inflation and rising energy costs have hit households around the world, Britons have been hit particularly hard in Europe, with inflation hitting double digits and hitting a 40-year high. Price increases on the weekly supermarket reached 11.6% in the two weeks to mid-August, the fastest pace since Kantar, a market research firm, began collecting data in 2008 UK consumer credit card debt rose at its fastest pace since 2005 in August, Bank of England data shows.

Iceland Foods Grocery Loan Terms

  • The customer requests the loan, which is issued on a prepaid Mastercard;
  • The initial loan amount is between £25 and £75 (~R500 – R1,500);
  • Once Fair For You, a non-profit consumer lender, has completed a background check, the loan can be increased to £100 (~R2,000);
  • Customers do not pay interest; Iceland Foods pays the equivalent of interest to the nonprofit loan company Fair For You;
  • Customer repays £10 per week over a maximum of eight weeks;
  • Payment holidays and overpayments are available free of charge;
  • There are no penalties or fees involved, but customers’ credit rating could be affected if they stop paying, and access to Fair For You services may be terminated.

“It speaks volumes about the economic situation and the pressures many families are under that there has been such strong uptake,” said Simon Dukes, chief executive of Fair For You, a consumer finance provider backed by the British Treasury which provides the loans.

The company planned to issue about 50,000 loans over 18 months, according to Dukes. Assuming a 40% acceptance rate, they could reach that number in eight to 10 months if adoption continues at this rate, he said.

There are currently around 1,000 customers a day submitting requests, he added. This is well below the initial wave when the offer was first announced, when there were 15,000 bids per day.

Iceland Foods did not immediately respond to a request for comment.

Rising bills

The grocery chain announced the initiative last month, becoming one of the first supermarkets to enter the booming consumer credit business as households grapple with rising bills.

At the time, Labor MP Stella Creasy, who campaigned for greater regulation of consumer credit, tweeted that such interest-free credit was likely to lead to increased spending and further indebtedness.

But Dukes defended the offer, saying it was best to go through a loan shark or payday lender, who often charge exorbitant interest.

“Microloans work because they are small enough to be repaid without causing anxiety,” he said. “It allows people to take control of their finances – which is often all they need.”

–With help from Katie Linsell.

Share.

Comments are closed.