Iceland to offer interest-free loans to customers as cost of living crisis bites
Iceland will offer customers interest-free loans to help with their food shop amid soaring inflation.
The supermarket trialled the scheme in Huddersfield and Rhyl, Denbighshire, before rolling it out across Wales, where more than 500 customers used it.
Managing director Richard Walker said loans – provided by charity-owned lender Fair For You – would only be offered to those who can afford them.
The “real value” of pay fell by 3% from April to June, according to new data.
Repayments are set at £10 per week, with customers able to choose the day they are made and overpay if convenient to them.
The scheme comes after a regional pilot trial, where it found 92% of customers using food banks previously had stopped or reduced their use of them.
During the pilot phase, customers paid interest on loans, however Iceland have now decided to make all loans interest-free for the national roll-out.
Rhyl was initially included as a pilot area, before expanding across Wales, as over 500 Welsh customers used the loan service.
Iceland’s ‘food club’ has teamed-up with ethical lender ‘Fair for You’ to help customers purchase everyday items.
The Office for National Statistics (ONS) found average wages in the UK rose by 4.7% in three months, but this was below the rate of inflation – which was 9.4%.
The gap between pay growth and inflation is the biggest since records began more than 20 years ago, as the current inflation figure is 9.4%, while wage growth falls far behind at 4.7%.
The frozen food provider also reported that this year 8.4 million people are going hungry, and 9 million families who receive benefits will be an average of £500 worse off due to inflation.
Speaking to BBC Radio 5 Live this morning, Iceland’s managing director Richard Walker said: “We started piloting for 18 months in some of the most deprived areas around the UK and actually the results were phenomenal.
“The Social Impact Reporting showed that over 90% of people reduced their need to go to food banks, improved people’s credit scores, their mental health, they ate better, and 70% of them didn’t fall behind on essentials like rent and council tax.”
He went on to explain how the loan actually works: “You can apply online you get a response as quickly as in an hour.
“We’re not the loan provider but Fair for You will only loan to people who can afford to repay it.
“Those on a regular salary and people who are who are well off, it wouldn’t apply, and nor would someone who you know, quite frankly couldn’t afford to repay.”
When asked what happens if the loan is not repaid on time, Mr Walker said: “It’s a collaborative, flexible process, people are helped not harassed.
“The debt is not sold off to third parties, and third party debt collectors are not brought in.
“Actually, everyone is put on a flexible long term payment plan if they can’t afford to repay.”
Successful applicants for the loan will receive a preloaded food club card within five to seven business days.
The Iceland chain began in the 1970s, founded by Mr Walker’s father, and now has nearly 1,000 UK stores, with its headquarters on Deeside industrial park in Flintshire.