Daily Mirror (Northern Ireland)
War on the credit sharks fleecing hard-up families
£1,500 Overdafts among crackdown targets
A CRACKDOWN is being launched on shops that charge struggling customers rip-off interest rates on rent-to-own household goods.
The Financial Conduct Authority also yesterday vowed to tackle overdraft charges in a war on high-cost credit, following a two-year investigation.
Proposals include a cap at rent-toown stores, which typically spread the cost of appliances over three years.
They charge small weekly payments but with high interest. The FCA found cases where people paid five times more for basic households goods. So a cooker priced £300 would, in some cases, end up costing £1,500.
The watchdog warned some 400,000 people have debt with such firms and the amount owed has soared since 2014 from a typical £2,000 to £4,300.
Examples of this type of shop include Brighthouse. The FCA also targeted overdraft charges. Banks, which rake in £2.3billion from them, would have to alert account holders to potential charges and would be barred from including overdrafts in “available funds”.
The FCA is also considering a ban on
IT’S shocking that the most vulnerable, those on the lowest incomes and who can least afford it, pay the most to borrow money.
The Financial Conduct Authority had the chance to make a real difference to lives and make it safer to borrow without ending up in serious debt.
Allowing people who simply cannot afford repayments to carry on building up more debt and then slapping them with extortionate interest upon interest is shameful. All high-cost credit should fixed fees. But critics said it must go further. In 2015 it capped payday loan interest and fees at 0.8% a day. Firms such as Wonga were charging up to 5,853% annually.
Moneysavingexpert’s Martin Lewis
I can’t see how to escape never-ending nightmare
Dad-of-two Matt from Grantham, Lincs, just wanted a TV but has ended up thousands of pounds in debt.
Matt, 32, explained: “I’m a low earner and don’t have a good credit score, so when I found a shop offering what seemed like a very affordable way to buy a TV, I went for it.”
He moved in with his partner and went back for a cooker and fridge. When they had kids they needed a washing machine “and things snowballed”. Matt repays £280 a month and gets slapped with £40 missed-payment charges.
He said: “I reckon I’ve paid back at least twice the price I thought I was paying for items. I’m totally out of my depth and can’t see a way out of this endless nightmare.”
said: “The current regulation is farcical. While rightly the cost of payday loans are capped, other short-term high-cost lenders can charge what they like.”
Labour MP Stella Creasy said: “Yet again we’re seeing the FCA play ‘whacka-mole’, looking at individual products rather than the bigger picture.
“Only capping the cost of credit itself will truly protect all consumers.”
But John Glen, Economic Secretary to the Treasury, said the measures would protect the most vulnerable people.
FCA chief Andrew Bailey said: “Highcost credit is used by over three million consumers, some of who are the most vulnerable in society. We have proposed a significant package of reforms.”
The changes will be subject to consultation and the cap on rent-to-buy shops will not be in place before next April. Brighthouse declined to comment.