Looking at the best buy tables for both, £10,000 over 5 years and £5,000 over 3 years, the top of the market seems to be between 7.9% and 9.9%. This has been pretty constant for a long time. The issue seems to be that because the Bank of England Base Rate is at an unprecedented low of 0.5%, loans should not be increasing as the margin for lenders has widened.....a fair and just point.
This got me thinking about lenders such as Provident Finance or the “Provy” as it is affectionately known. Would you like to take a guess at what their APR on a £300 loan over one year is? To be honest it is so outrageous that I doubt you would guess in a million years.
272%
And before anyone asks, no I haven’t missed out a decimal point.
The Provident’s justification is that they deal in small sums of money, they offer their services through agents calling personally to collect the money and their products offer flexibility. If truth be told they are ripping off the poor. Their customers are low income families without access to high street lenders or mainstream personal finance. It is actually a fairly disgusting business model and all involved should be thoroughly ashamed. Worst of all they are not alone, there are other companies that employ the same deplorable business model
The Office of Fair Trading already has the means to stop this enshrined in the Consumer Credit Act of 1974, whereby it is charged to protect consumers from “extortionate rates of interest”. While the FSA should be tackling issues like this head on, if the OFT is not capable of policing the Consumer Credit Act then the FSA should have sought to take over responsibility years ago. I think it is fair to say that the FSA have missed the boat on this one.
It has also been subject to Parliamentary scrutiny and I am pretty sure they are still debating it through some Select Committee or other. Let’s face it, you don’t need a committee to tell you when something is this wrong.
The solution is quite straight forward the Office of Fair Trading, the Government and the FSA should get off their collective arses and revoke the Consumer Credit Licence of Provident Personal Finance, “simples”, to quote that annoying piece of fur on the telly.
It's good to see deplorable lending practices such as this being brought to the attention of the public. For people with access to more mainstream lenders with decent rates, it can be easily overlooked; but should not have been by the FSA.
ReplyDeleteIt's pretty clear what "agents calling personally to collect the money" really means. I doubt it's the kind of caring personal touch that a low income family struggling to make repayments really needs.
the rich get rich n the poor get pulverised..I had not realised the situation was like this.
ReplyDeletewe save the banks and they slip away with our money. there is a lot of ripping going on here.
Not just by the Provy.
I agree that it's not just the Provident who are blatantly targeting those on a low income for exceptionally expensive credit.
ReplyDeleteI work with individuals and families who are experiencing homelessness. A lot of people have to resort to using Brighthouse - a weekly payment shop. This place really is the lowest of the low. There are several outlets in Glasgow. They sell household white goods, furniture and electrical items which people can collect straight away when they need them to move into a new home.
Unfortunately people end up paying almost double the amount the goods are worth in the end due to the massive interest rates. People in such difficult circumstances are very much at risk of taking on an unmanageable amount of debt. And just for the most basic necessities like a fridge or a bed.
People who need it most can't get access to the Evil Tesco bargain washing machine or the low cost children's beds from Ikea.
Credit Unions are great and I really support them. The Glasgow Credit Union alone is massive and a force to be reckoned with. But they do not offer any instant credit. Maybe this should be looked at, controversial as this may be for them.
Church Action on Poverty have been highlighting the extortionate and irresponsible lending practices of doorstep lenders, of which the Provi (http://www.church-poverty.org.uk/campaigns/debt/Analysis%20of%20Provincial%20Financial.pdf/view) is the largest.
ReplyDeleteNow is a good time to be campaigning:
1. The "credit crunch" and recession are hitting low-income households hardest
2. There is widespread anger at the greed of many banks and lenders, itself one of the root causes of the crisis
3. The Office of Fair Trading are doing an investigation into high cost credit - they are looking to make a difference (see http://www.church-poverty.org.uk/news/highcostcredit/)
4. And of course the general election will happen within the next 9 months - politicians are looking for popular measures.
We currently have THREE different film makers looking to expose the dodgy dealings of high-cost lenders, so do contact us if you can help.
And if you want proof that the Competition Commission "remedies" haven't worked, read this Provident Financial Interim Report 2009: "The competitive position in the £3bn home credit segment of the market has not changed materially since the Competition Commission concluded its review of the home credit market at the end of 2006…"
ReplyDeleteUnbelievable!
ReplyDeleteI had no idea the 'Provy' were as bad as that. Pretty outrageous.
ReplyDeleteIt is appalling that when it comes to financial loans those who can least afford to be discriminated against are those who are.
ReplyDelete