As the banks tighten their credit criteria are and more people are being refused any form of credit. That goes for loans, mortgages and credit cards.

According to Datamonitor, by the end of 2009 some 9 million people will be unable to raise credit from Britain’s banks. That’s 1 in 7 people.

On top of this, the companies that only two years ago were lending to those with poorer credit histories are falling like flies. London & Scottish went bump before Xmas, Benefitial Finance closed last month and Cattles appears to be teetering on the brink. That leaves just a few companies such as Provident Financial operating.

But don’t rush to Provident. They operate through agents going door to door collecting weekly instalments and their interest rates are eye watering. What would you guess their typical interest rate is? 25%? 30%? Could it be 40%? No it’s a mere 100%!

For some the only other option is what’s called a “pay-day loan”. That’s a loan given to workers to tide them over until they receive their next pay cheque.
A typical charge fort this service is £25 for a £100 loan. And that works out at an annual interest rate of 2000%. So perhaps we should consider Provident as a bargain!

These interest rates look morally wrong to us. We think that the Government will have to set up an enquiry into what is happening to see whether these interest rates are giving rise to excess profits – and if they are, they’ll have to set a cap the maximum interest rate and charges.