Michael Sheen has got skin in the game. The actor and activist has long been interested in fair credit – he launched the End High-Cost Credit Alliance at Responsible Finance’s 2019 conference. In his new documentary about the UK’s broken consumer credit market and how we can scale up better borrowing, for which he was not paid a fee, Sheen used £100,000 of his own money to write off debt in South Wales communities.
Sheen’s ‘heist’ in Channel 4’ s Secret Million Pound Giveaway, which aired on Monday, was to buy £1m of debt from hundreds of people for his £100,000.
It was a clever way to grab attention and get people to demand better borrowing. Sheen wryly used a picture of George Clooney to show that when debt is sold on from one firm to another, for pennies in the pound, the original borrower’s debt is not reduced.
But he and the people featured, one of whom was working two jobs to make ends meet – made clear that problem debt and a lack of access to affordable credit is no laughing matter. He showed that it’s easy to get into trouble around debt and credit, not “because of people being feckless and making bad choices, it’s as a result of things being very difficult.”
This point will resonate with Responsible Finance’s members, partners and stakeholders. So will Sheen’s observation that “the whole system around access to credit is skewed against the people who have the least. If you’re viewed as risky, up goes your interest rate or worse, the banks can refuse to lend, leaving those people in a desperate situation.” This is so-called the ‘poverty premium’ – and as our report into how credit scores penalise many shows, it’s frequently unfair.
CDFIs, highlighted positively by Sheen during the documentary, successfully lend to tens of thousands of people every year who can’t get fair credit elsewhere and might otherwise turn to illegal or very high-cost lenders. They look beyond blunt credit scores and can say “yes” when others say no, so people who want and can afford credit for an emergency bill or a large cost can cover it. And they typically save people hundreds of pounds in interest on an average loan. As Sheen points out:
“I don’t think borrowing is a bad thing. Lots of people need to borrow money, for everyday expenses like an MOT bill, or school uniforms.”
The trouble is, many are locked out of mainstream credit and end up trapped in cycles of debt with loan sharks and very high-cost lenders. Many small businesses and social enterprises also struggle to access the funds they need to start up or grow, hampering economic growth.
“Now, it might surprise you to know that there are lenders offering much more affordable credit,” said Sheen. “There are companies out there, small ones, called CDFIs and Credit Unions. Right now, they are not growing at the rate needed to meet the demand. But with the right support from the banks, they could be scaled up.”
Sheen investigated how to make this happen and in his documentary backed calls for the government to pass a Fair Banking Act. The Fair Banking Act was one of our key policy asks in our 2023 and 2024 impact reports, and we are a member of the Fair Banking for All Campaign. Research suggests that a Fair Banking Act in the UK could increase fair and affordable lending to individuals by £2bn a year. This would help to pull the rug out from under the illegal lending market, by providing people with a safe and affordable alternative when they’re in urgent need.
Responsible Finance, like many of our partners working to boost financial inclusion, gave the programme’s producers extensive background information. Several CDFI customers spoke at the Fair Banking Act meeting in Westminster which Sheen refers to in the programme, saying what he’d heard “made a big impression” and “the proposed law…could be game changing.”
The programme also featured Former Prime Minister, Gordon Brown, who said:
“We’re not against banks, but we need a banking system that works for the people who depend on banks and the people who contribute to banks…Banks can actually do more on financial inclusion and some do, as you know, and some want to do more.”
This is a good point. Several banks have recognised, without needing to be legislated to do so, that CDFIs play a vital role in the finance ecosystem.
For example, NatWest Group worked with Responsible Finance and CDFIs to channel hardship grants directly to families in need. Some of the banks are making great progress, partnering with CDFIs or referring people to CDFIs in new ways. But, as Gareth Evans of the Financial Inclusion Centre said in the documentary, there are “20 million people in financially vulnerable circumstances and that’s increasing 16% in the last year. The scale of that problem needs big solutions.”
Sheen’s documentary is a welcome nudge to the debate. And it comes from an actor who is not simply lending his name to a cause but who has made a lot of effort over several years to push for “better borrowing” as well as putting his own money where his mouth is.
Responsible Finance chief executive, Theodora Hadjimichael, says that “For economic growth to happen, we need lenders that get to know businesses and understand people’s lives, make fair lending decisions that take these into account, and offer affordable finance, and incentives to ensure that growing demand for affordable, ethical, credit can be met. That’s why Responsible Finance is part of the campaign calling for a Fair Banking Act.”
Want to take action to support Michael Sheen and the Fair Banking for All campaign’s calls for a Fair Banking Act? You can quickly and easily email your MP now using this tool.