Loans. Loan Sharks are alive and snapping.
According to the Competition Commission, there are still doorstep loan sharks patrolling estates and charging up to 1,000% interest per year for loans. The average is apparently, 177% per year! At last the Competition Commission plans to cull them.
Apparently around 2 million Britons are falling prey to these sharks. Many are those on the lowest incomes and with household budgets stretched to the limit. But no matter what their circumstances, interest at rates averaging 177% is nothing short of criminal.
The Commission is planning to force the so-called home credit industry to clean up its act by forcing the lenders to clearly spell out for their clients, what the money or credit really costs them. And if lenders don’t introduce more reasonable interest rates, the Commission is planning to set a maximum rate, enforced by law.
Their hope is that faced with the clenched fist of law, the industry will act reasonably.
The home credit industry is dominated by five large companies such as Provident Financial. But there are thought to be around 500 other lenders in the market. They specialise in providing credit to people who the mainline lenders have turned away. Repayments are collected weekly or fortnightly on the doorstep from the customers’ homes.
We appreciate that this means that the lenders will experience significant levels of bad debt and the collection cost are high, but in our view, loans and credit on these terms will only serve to push their clients deeper into the financial quagmire.
Financial Provident is the biggest lender in the home credit with more than half of the market. I wonder if they consider their credit card with a 70% interest ticket, to be good value? On the surface of it they do, as their spokesman said, “Customers are not being overcharged for their home credit loans, nor is the home credit sector making excessive profits”.
The Competition Commission want customers to be given clear information on the full cost of the loans. They hope that once they appreciate the cost, they’ll think more than twice. They’re also hoping to encourage more price competition amongst the existing players in the market.
The Commissions provisional proposals are due out later this summer. We say to the Commissions’ chairman, Peter Freeman, make sure you’re not a moment late!
