Dispatches, Christmas on Credit. Watch it on 4OD

avantra

PasturesNew wrote: »

The programme have now pulled together a single mother who likes to find bargains - and an advertising executive on a good salary, with a mortgage mostly paid off.

Set them both a target to buy three specific goods and get a £500 over 12 months cash loan.

Purpose: to compare the rates/cost to each of them, to prove that it costs more to be poor.

I've always found it's not just the cost of things when you're poor, it's the time cost to track down and compare all the prices just to ensure you've got the cheapest price. It takes aaages to be poor.

:p:p:p Hahaha PN, you hit the nail on the head, however I know of many affluent dudes who do comparing and than getting the best deal as it gives them a sense of empowerment they sometime desperately need (and OC someting to talk about at at a dinner party):rotfl:

bo_drinker

Quickquid.co.uk charging up to 10,000% for payday loans

By Andrew Penman on April 30, 2009 12:42 AM in Debts and loans


Some legal lenders are charging more than loan sharks, according to a shocking report.
And it's the poorest families that are targeted by "payday loans", warn the report authors senior Labour MP Ian McCartney and Damon Gibbons of the Debt on our Doorstep campaign.
They didn't name any of the lenders, who give loans due for repayment when you're next paid, but the first four we found with a Google search were Payday Bank and Payday Cash Today which charge annual interest of 1,355%, Payday UK which charges 1,737%, and Quick Quid, whose website used to give a typical annual interest of 10,000% but now gives a figure of 2,356%.
Owned by US company Cash America it's run by Daniel Feehan, seen above and below, who isn't likely to need a loan from Quick Quid - he netted around £700,000 in salary and bonuses according to US business bible Forbes.
The report by Ian McCartney and Damon Gibbons, called Protecting Low Income Borrowers in the Credit Crisis, found that:

* "Recent years have seen a growth in extremely high cost credit products targeted at low income groups. These include payday lending, which takes post-dated cheques as security for loans of up to a month and routinely charge in excess of 1,000% APR (annual percentage rate)."
* "The current situation is now desperate. In some instances, legal lenders are now charging more than illegal loan sharks. Legal lenders now charging £160 to £380 per £100 borrowed, depending on the number of months the loan is rolled over."
* "The fact that costs of credit in the legal market can be higher that the average cost from a loan shark makes a mockery of initiatives designed to clamp down on illegal lenders, and of the claim that allowing high cost legal lending will somehow prevent a growth in illegal lending."
* "We urge government to address both sides of that equation, by strengthening access to credit at a fair price for people on low incomes and also by clamping down further on those that would exploit vulnerable households by charging excessive prices and /or by operating illegally."
* "Charging people on the lowest incomes the highest prices only increases the risk of default."
"Low income borrowers are providing the greatest levels of security to consumer credit lenders and yet also paying the highest prices."

In a section on "Myths and Truths" the report carries the following.
Industry myth - "We do not agree that the poorest get a bad deal from companies operating in their area. They offer a legitimate business and need to make money like anyone."
Truth - It is possible to make money without ripping people off. High cost credit markets are not "price competitive" - people using them pay over the odds for the service. There is an underlying principle here: that the poorest customers are treated as second-class citizens and offered inferior conditions by the marketplace. This is unacceptable and needs to change. We agree that price caps generally - under normal market conditions - are not a good idea. But the credit market is not a normal, competitive market for people on low incomes and so a price ceiling can work to reduce the cost of credit without driving decent, efficient companies out of business.
Until recently the Quickquid.co.uk website had listed its typical annual interest at just under 10,000%. Now gives a figure of 2,356%. We asked what has changed - the amount it charges, or the way it calculates its annual interest.
We also asked if Quickquid wanted to comment on other points raised in the report.
Here is the response in full from US parent company Cash America, which is listed on the New York Stock Exchange.
"In our interaction with the typical UK consumer, we have noted that the he/she is completely uninterested in the APR (annual percentage rate) of the loan requested. The typical customer request is to quantify the actual cost of the loan in real monetary terms; 'how much does it cost to borrow £200 for the next 30 days?' The yearly cost of credit has little comparative value for a 30 day loan. Our customer service area has noted that the only calls that we receive that query the loan APR are originated by reporters, not customers.
"We have not changed the rates recently. Either description (2,356% or 10,000%) of APR is accurate.
"Quick Quid views its customers as rational adults who choose our product based on its favourable comparison to other alternatives.
Quick Quid loans are a favourable alternative to bank overdraft fees, credit cards fees and missing work for want of cash to make auto repairs or buy tube tickets. The cost of Quick Quid credit is appropriate given the risk and convenience of the product. It is our duty as a licensed lender to provide transparent disclosure of loan terms so that the customer can make an informed choice. We feel that we have done so and that Quick Quid customers are fully aware of the terms of the loans offered at our website.
"We are unaware of what constitutes excess profit. Was a study of earnings done on payday lenders or is this a wild guess? The data on publicly traded payday companies in the United States shows that the profitability of these firms is in line with that of other financial companies over the past 10 years."

kabayiri

PasturesNew wrote: »

The programme have now pulled together a single mother who likes to find bargains - and an advertising executive on a good salary, with a mortgage mostly paid off.

Set them both a target to buy three specific goods and get a £500 over 12 months cash loan.

Purpose: to compare the rates/cost to each of them, to prove that it costs more to be poor.

I thought this part of the program was poor actually.

The advertising lady was able to get the better deals because of a good credit rating, rather than disposable income.

I can only see more people becoming disenfranchised from mainstream money lending and product finance, not because they don't have money at differing times, but because of holes punched into their credit rating due to difficult times.

Once you alienate these people from the mainstream consumer avenues the only viable alternative these people see are the BrightHouses/doorstep lenders off this world.

We seriously need government to back Credit Unions, especially in the area of short term financing.

bo_drinker

Tried to watch on 4 od but it's stop start all the time, any ideas ??

Sol00

kalaika wrote: »

I watched the programme and agree that Brighthouse's sales tactics were dispicable. However, part of me does think that they offer an important service, i.e. offering credit for those that the banks won't touch to assist in purchasing needed goods like cookers, etc (not Playstations and other luxury items) and I wonder what would happen if legislation to cap interest rates were introduced. Would companies like this just close their doors as the risk/reward balance (i.e. opportunity for profit) didn't favour them? If so would low income families only have the option of using loan sharks to buy their cooker (which would be even worse)?

It also did occur to me that whilst APRs should always be used when comparing standard loans/credit, the use of APRs appears completely redundant when talking about pay day loans, etc, where the terms cover a period of much less than one year.
For example (taken from the QuidQuick website) Borrowing £50 for 30 days would result in a repayment of £64.75, which is an intrinsic interest rate of 29.5% but equates to an Annual Interest Rate of 2,222.46% which, to me, is completely irrelevant and very misleading as the loan terms are nowhere near a year long.

I don't think anyone's saying they don't provide an important service to the sub-prime sector, just highlighting that they are taking advantage of the customers that they are there to help. Adding on option service cover etc at £7 a week is a disgrace!

I don't think that the interest cap proposal would affect Brighthouse as their interest rate isn't exceptionally high compared to some of the other payday lenders for example.

PasturesNew

bo_drinker wrote: »

Tried to watch on 4 od but it's stop start all the time, any ideas ??

I'd try sitting with it on pause for half an hour and see if it buffers itself.

It's either your connection slow, or their server busy. Happens to me a lot as I have a slow connection.

ThrowingStonesAtYou

kabayiri wrote: »

We seriously need government to back Credit Unions, especially in the area of short term financing.

How do credit unions work? I've seen them labelled as cheaper, but if all their customers have dodgy credit ratings are they sustainable? Surely the reason credit is expensive for poorer people is because they are less reliable in paying it back so the extra interest needs to cover the higher level of non-payers?

SingleSue

Out,_Vile_Jelly wrote: »

I saw a bit of this last night. Proof that my family are definitely middle class now; I had never heard of Bright House. Absolutely shocking the final total of the items they were buying; washing machines and cookers I can see that people cannot wait and save up for, but most of the stuff was shiny, electrical and non-essential.

I have only heard of them because of the television adverts...went online to see what it was all about, banged my head in shock against the ceiling of my cupboard under the stairs and looked again.

I missed the ceiling of the cupboard under the stairs the second time around.

PasturesNew

ThrowingStonesAtYou wrote: »

How do credit unions work? I've seen them labelled as cheaper, but if all their customers have dodgy credit ratings are they sustainable? Surely the reason credit is expensive for poorer people is because they are less reliable in paying it back so the extra interest needs to cover the higher level of non-payers?

I don't know, but I do know there aren't many. To start a credit union, you have to have a group of people that have something in common (e.g. all live on the same estate, in the same area), then there's proper setup procedures. Then everybody has to save for some time before they're allowed to borrowl.

It is how lots of old, well known, building societies started out: http://en.wikipedia.org/wiki/Credit_union#United_Kingdom


Also read: http://www.moneymadeclear.fsa.gov.uk/pdfs/credit_unions.pdf

Funds are protected under that £50k protection.... but in my opinion, the hardest thing is still finding a credit union and being able/eligible to join it.

kabayiri

ThrowingStonesAtYou wrote: »

How do credit unions work? I've seen them labelled as cheaper, but if all their customers have dodgy credit ratings are they sustainable? Surely the reason credit is expensive for poorer people is because they are less reliable in paying it back so the extra interest needs to cover the higher level of non-payers?

It's a good point. A credit union isn't free money, but it allows people to build good local reputation by demonstrating repeated cycles of borrowing and paying back. This financial cycle accurately describes the payday loan situation.

You are always going to have people who won't pay back. A mixture of carrot and stick will help those in marginal circumstances become good credit risks over time though.

To me, the taxpayer wins all round. If a low income person gets into a vicious cycle of debt with payday or doorstep loans, they could end up losing their home and their worldly goods. We would end up picking up the pieces anyway, whilst some spiv without conscience walks away with the profit.