In many high streets of cities across the UK there is a shop that has a lovely range of furniture in the window. It has a name across the doorway that is recognisable and trusted by many, because it is seen so frequently in TV adverts.
The window displays are enticing, and the items appealing, and the modest APR draws you in.
Inside, however, all might not be what you expect. Is that mid-range fridge freezer really £1,326? What, a top-of-the range fridge freezer cannot cost almost £1,000 more, can it?
Rent-to-own (RTO) stores like this have expanded in the past few years, providing, on the face of it, a solution to customers who do not have the wherewithal to easily replace a broken essential kitchen appliance. It’s good business: one chain alone has all but 300 stores up and down the country, with more planned.
Over the past two years, however, our team have been developing Fair for You as a credible challenger to these RTO stores.
Research was conducted among lower income family households, and the entire offering of Fair for You was developed to meet the modern borrowing needs identified in the research.
What this means in practice is that Fair for You provides small, flexible and tailored loans to allow its customers to buy quality, branded items from manufacturers through the virtual high street on its website – www.fairforyou.co.uk.
We were just as determined to ensure that the co-operative principles and the credit union ethos – which had driven the structure and the mission of the organisation – guided its operation.
Central to that ethos was the fact that the business could not be diverted from its intention to change the way it lent to lower-income families in the UK.
Advice was taken, and as a result, a charity was set up with the objective of “alleviating poverty in the UK by developing better credit solutions”. The charity, also known as Fair for You, wholly owns the subsidiary which is Fair for You Enterprise CIC, and which has a full FCA lending licence.
Ben Reid, CEO of Midcounties Co-operative and newly appointed chair of the Fair for You CIC, said: “I was all too happy get involved in this important new social enterprise, given the social challenges it’s looking to take on.
“For far too long, far too many people on low incomes have had little alternative but to use high-cost lenders to obtain basic household items. I’m proud to say that Fair for You developed out of the co-operative credit union sector, and as you might expect, offers both affordably priced essential items and an affordable means of paying for them.”
Fair for You’s full lending licence was issued just six months ago, and feedback from customers has been quite extraordinary for any business, let alone one operating in financial services. Customers are openly sharing how they feel the Fair for You approach is transformational for them and their family.
It isn’t just about the cost savings – Fair for You’s consumer-led approach is also important. Customers don’t get hit with penal costs if they do miss a payment. What they get instead is a call from their relationship manager to get things back on track.
And good payers are rewarded with entry into the Good Payers Club, with a wider virtual high street and lower-priced loans.
This is a niche, but modern, efficient finance solution, offered across the whole of the UK, with a rapid turnaround of small loans. The customers get to set their own repayment level; more than 40% set a level and then overpay, so they can miss payments if they get hit by an emergency.
Fair for You has recently launched its new website expanding its virtual high street to include living and dining room furniture.
The operation continues to be consumer-led, and brings in new products requested by customers. It is focused on quality and utility items that are affordable and designed for heavy usage in a family household.
Our managers calculate that they have already saved customers close to £1/2m compared to buying through RTO stores, and Fair for You are just beginning to scale.
While our offering is on-line, it is not a high-tech solution. We provide an on-line store and application solution, backed-up by a good telephone based service. Importantly, most customers work part-time or are on flexible-hour contracts, so they need to be able to apply 24 hours a day, and to speak to staff seven days a week, to talk through their affordability assessment and set up payments.
Customers are from all over the UK – even remote parts of Scotland and on Shetland – and Fair for You says they really appreciate not having to pay any extra for delivery, which is a major bonus to them.
Now we are sharing what we have learned with other not-for-profit lenders, including credit unions and Community Development Financial institutions.
Does it sound too good to be true, or just a modern take on good old co-operative principles? We like to think that what we’ve developed and delivered has many parallels with the idealism and vision of a better social order that inspired the original Rochdale Pioneers who put their customers at the heart of their business model.
• Angela Clements is CEO of Fair for You, and was CEO of CitySave Credit Union in Birmingham from 2009-2014.