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Last Updated: Friday, 5 May 2006, 13:42 GMT 14:42 UK
Loan company lends into negative equity
Carol Vorderman
Carol Vorderman found fame presenting Countdown on Channel 4
Concern is growing that celebrity-led advertisements are leading borrowers to put their homes at risk, BBC ONE's Real Story has uncovered.

In one featured case loan company FIRSTPLUS, promoted by Carol Vorderman, lent Emma and Kris Galloway more than the equity of their property.

In a transcript obtained by the programme, the sales person claimed that other companies would only consolidate loans up to 95% of the value of a property - but FIRSTPLUS said they would lend into "negative equity".

The Galloways, from Ayr, decided to contact FIRSTPLUS, one of the biggest loan consolidation companies in the UK, after they saw an advert for the company promoted by TV maths expert Carol Vorderman.

Monday, 8 May, 2006
They had debts of over 20,000 across a variety of credit and store cards and wanted to extend their credit and pool their loans into a single payment.

Their joint income at the time was only 18,000 a year, yet they were lent more than 47,000 secured against the value of their home.

When they took their loan out in December 2003, their interest rate was 10.9% -since then it has risen to 12%.

FIRSTPLUS reserve the right to alter their interest rates to reflect base rate rises.

'Toxic loans'

The subsequent rise in the Galloways' monthly payments means the couple are now struggling to meet their monthly payments.

Independent loans analyst Iain MacQueen-Sims is critical of how loan consolidation is promoted, saying: "The Americans tend to call it predatory selling where you take advantage of a particular borrower's situation.

"They're called toxic loans because they can damage your financial health.

"You end up being in a worse situation than you were before. This is bad news especially when your home is at risk."

She (Carol Vorderman) is well known for having a kind of expertise and this is transferred in the mind of the consumer
Malcolm Hurlston, CCS
Next year the value of the secured lending industry in the UK is likely to be worth more than 30 billion.

However, the independent charity the Consumer Credit Counselling Service (CCCS) believes that other options should be considered before converting unsecured loans into loans secured against the value of a property.

The CCCS is supporting an online petition to Carol Vorderman to stop promoting secured loans which has been launched on the website of money saving expert, Martin Lewis.

CCCS Chair Malcolm Hurlston tells the programme: "I think the problem is because of her high profile, she is well known for having a kind of expertise and this is transferred in the mind of the consumer.

"I think there's a very great danger for anything that is heavily advertised and promoted that will lead people towards a conclusion which is unsuitable for them."

FIRSTPLUS told the BBC they have never repossessed a home.

"We hope that Carol gives people the feeling that FIRSTPLUS can help restructure debts quickly, simply and responsibly. The vast majority of FIRSTPLUS customers experience no problems and we receive dozens of thank you letters to that effect."

Carol Vorderman declined to comment.

Real Story: Home Or A Loan - BBC ONE, Monday 8 May, 2006 at 1930 BST.

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