In response to calls from Archbishop of Canterbury Justin Welby for a more ethical lending approach, British Money is set to provide loans with free income protection, Simon Burgess has said.
With a plan to release £50m of his own funds to provide the loans and calling on other lenders to follow suit, the director of the Essex-based insurer said: “This will be a huge leap forward in addressing calls for greater financial inclusion in an ethical manner, while giving borrowers peace of mind their loan is automatically covered. I urge other lenders to follow suit.”
A former financier, who sits on the Parliamentary Commission on Banking Standards, Archbishop Welby has lobbied strongly for a cap on high interest rates charged by loan companies.
Last year, shortly after he was inaugurated as Archbishop of Canterbury, the Most Reverend Justin Welby said the Church could do more to help non-profit lenders compete with payday firms.
Under the new scheme, the loans will be available online and borrowers will be offered a competitive APR. The cost of the additional Defaqto-rated five-star cover will come out of profit margins.
Claire Walsh, financial planner at Sussex-based Aspect 8, said: “I think anything that helps prevent people from ending up in financial hardship is a good thing.
“In an ideal world, everyone would have income protection to provide a proportion of their earnings if they were unable to work due to long-term accident or illness, but unfortunately few people have income protection insurance.
“I would guess that the protection on offer here is not income protection, but more likely payment protection to cover the loan repayments only. While payment protection insurance has developed a bit of a bad reputation, this was due to high costs and mis-selling.
“If an insurer could offer this for free built into the loans and the APR remains competitive, this offers consumers a valuable additional benefit.”
