A pound of flesh?

andy777_2

Hi,

I have recently read a couple of papers about the so-called home credit industry. (doorstep lenders to you and I). I was stunned to see reports of APR's well north of 100% charged to people with nowhere else to turn for a desperately-needed loan.

The authors of these papers suggested the solution was for more government intervention, imposing caps on interest rates for example. But don't we prefer less government intervention to more?

I'd be really interested to hear what others think about the issue of the private sector, rather than government, providing finance to those on low-incomes or with less-than-perfect credit records on more reasonable terms than currently on offer. Though I'm no economist, I really can't believe that the risk of home credit justifies the astronomical rates of interest charged!

D&DD

We have the provident door knocking round here its all above board..a legit firm..interest rates 102% apr :eek: On a council estate where many people have no other means of getting a loan they do a roaring trade..

suzieq

Hi Andy,

I don't have alot of experience personally in this area, but it is certainly something that angers me. A friend of mine was recently in some financial trouble, with a very poor credit history, and was pleased she had been accepted for a loan by Welcome finance. And whilst I'm not certain if this company is a doorstep lender, I was horrified to see her APR was 54.8%!! :eek: I can't believe these companies get away with this. It just seems that this is how people get themselves in deeper and deeper.

It's absolutely disgusting, and no-one should ever have to pay rates of interest that high. Daylight flipping robbery. Thieves like this make me :mad: that they're allowed to take advantage of people in a bad situation that may have no other way to turn.

Just IMHO of course

Suzie ~x~

bizzy_lizzie

I am at home now so dont have the report to hand but was reading about the governments concerns about financial inclusion. They seem to be making an effort to help people beome more financially aware & so more able to avoid these sharks. I am inclined to think this is the best way, rather than regulating everything to death, but it seems on such a small scale that it doesnt have enough impact. In the pathfinders they encouraged the set up of credit unions, introduced money managment classes & started up small scale saving schemes & found that children got parents involved etc. On the small scale that they worked in it was really successful but whether it becomes national thats a whole different ballgame. If the less well off can make a choice of a credit union over a doorstep loan company then its a start. Maybe they should consider working with someon like Martin & his team to really start to reach the masses.

BL

file_wizzard

Whilst I am certainly not advocating the dubious practices of these lenders they do provide a service, but whether the need that service is driven by necessity or just desire in today’s consumer market is a different matter.

With regards to the APR’s they do appear to be very high, i.e some Provident loans are at 475% APR, however in these cases the APR can be some what misleading as the doorstep loans are usually over a much shorter period i.e 24 weeks, this is not to say that the profit made is fairly questionable as the prime target market of these company’s are vulnerable social groups to say the least, non the less we live in a capitalist society and the old saying make hay whilst the sun shines certainly applies to these lenders!

How long it continues is a separate matter !!!

lynzpower

I work for an older peoples social work team and have met a number of frail old folk who have fell foul to doorstep lenders. One a 90 year old woman needed a new telly, her one blew up and shes housebound - shes paying nigh on 400 a month for however long to pay it back ( meaning what happens? She has to cancel her meals on wheels and homecare, as she cant afford it) . A telly only costs 70 quid in tescos. I personally think that yes, the government has a responsibility to protect those who cannot make decent financial decisions themselves, ie those who are elderly, those with learning disabilities and those among us who dont speak english as a first language. Loan sharks prey on the vulnerable, thats what they are there for. they dont sell loans to professional people, they loiter around the estates offering to lend money to anyone regardless of how they pay it back . sure no big difference to your CC card companies ( I KNOW FOR A FACT that one of the big CC cos is sending credit card, ready to go to homeless hostels in Central london for example) but the interest rate and the way loan sharks operate is not on really in this day and age, its really not.

pipkin71

There is a lot of high unemployment where I live and Provident seem to do a roaring trade. I've no idea what the interest charges are, although I know they're high, and I guess they would say they are a legitimate company but I would love to know why the agent seems to think that standing outside the school gate at hometime to 'collar' the parents [often single moms] who were not at home on payment day is ok. Now that doesn't seem legitimate to me. Luckily I've never had to use them, sadly others don't appear to have that choice, and that's why they can charge so much.

Pipkin

Tr@cker

Well thats a sad fact of life isn't it ? The very people who can least afford to borrow pay the most for credit.
The principle is just the same even with reputable companies-the better off you are the cheaper it is to borrow-it's !!!!!! about face to me but thats what you get in a laissez-faire capitalist society.

Broken_hearted

Or another way of looking at is the greater the risk the greater the APR.

Tr@cker

Yes and if the risk is greater wouldn't that mean the risk of firms not getting repayment is EVEN greater from those least able to pay ?

lynzpower

yes but if you charge exorbitant rates like my old dear example, surely you are much less likely to get the cash in the long run? Also, their bullying tactics show that they get the money in the end by simply frightening people.