Fears over huge interest lenders

Don't fall into the trap (file pic)
Don't fall into the trap (file pic)
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A VULNERABLE Wearside mum was rescued from falling into the clutches of the “morally bankrupt” lending industry after her fridge freezer broke.

The mum, who has two sons both with learning difficulties, was forced to consider using one of these high-interest lenders in a desperate attempt to look after her sons and feed her family.

But the company were insisting that having borrowed the money, she would have to pay back two-and-a-half times the amount.

Fortunately, the charity Barnardo’s stepped in, explained the dangers of these agreements, and offered the mum, who asked not to be named, an emergency grant to buy the fridge.

Now a local MP has joined the charity in criticising this industry, as well as rent-to-own retailers, accusing them of targeting the most poor and vulnerable in society.

Rent-to-own companies offer new appliances and televisions in exchange for weekly payments – but with the interest added on the customer can often end up paying double the price they would elsewhere.

Jonathan Ewen, Director of Barnardo’s North East, said: “In these tough economic times, the most vulnerable families in society are being lured into an unaffordable debt trap by a morally bankrupt lending industry.

“The poorest families are stuck between a rock and a hard place, with one in 10 households on low incomes managing their finances without access to mainstream banking services.

“Preventing families from resorting to exploitative rent-to-own agreements involves providing both good financial advice and fit-for-purpose bank accounts for those living on the tightest budgets.

“Additionally, we are calling on the Office for Fair Trading to help protect families from being unwittingly pushed further into poverty by compelling these unscrupulous lenders to make clear their extortionate rates.”

Previously the OFT have looked at the high-cost credit market but concluded that actions needed to force market changes were beyond its remit.

Bridget Phillipson, MP for Houghton and Sunderland South, said: “Families across Wearside are facing a big squeeze on their household budgets and living standards.

“Many people turn to these companies when they need to replace a washing machine or fridge.

“I’ve already called on the Government to regulate this industry and payday lenders by introducing caps on the total cost of credit.

“The industry is aggressively targeting and exploiting vulnerable people and low-income families leading to a spiral of debt.”

The Echo visited a rent-to-own retailer in Sunderland to check the prices against the cost of the products elsewhere.

We found that a Hotpoint fridge freezer which is on sale in other stores for £550 would cost a customer at the loan shop more than £1,000.

Barnardo’s is demanding that more is done to help offer people other options to these loan companies and greater regulation for them is brought in.

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