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Wednesday, 21 November, 2001, 11:57 GMT
Many consumers 'financially illiterate'
Bank customers queue at a counter.
The bureaux has called for a 10-year government campaign
Consumers are losing more than 10bn a year because they are unknowingly buying financial products not suited to their needs, a report has said.

The survey, detailing evidence from 700 citizens' advice bureaux across the UK, blamed the problem on the fact that many people are "financially illiterate".

The report said consumers are being persuaded by high pressure sales techniques to accept unsuitable loans, insurances and warranties that can leave them worse off.

The findings have prompted the bureaux to call for a government campaign to improve people's financial knowledge and prevent them being "ripped off".

'Bewildering' choices

The National Association of Citizens Advice Bureaux (Nacab) said the pace of change in financial services has made it "almost impossible" for people to keep up to date with developments.

"Dramatic changes in the financial services market over the last 25 years mean that from their teenage years through to their deathbed, people now have a bewildering number of financial choices to make and responsibilities to exercise," Nacab chief executive David Harker said.

The bureaux say people often struggle to pick out the best service for what they need, and are unsure how to get financial advice.

Common traps that people often fall foul of include:

  • lower minimum payments on credit cards - leading to larger total payments
  • store cards - often charging high rates of interest
  • extended warranties - when the cost of repairing the goods can be less than the cost of the insurance

Catalogue of woes

One of thousands of examples given was of a borrower who took out a loan for nearly 6,000 to pay off arrears on her mortgage.

Twelve years on she had repaid 13,000 - but still had to pay a further 34,000 to settle the debt, at an interest rate of 35%.

Another example is the 26-year-old man who was sold family protection insurance to make sure he could repay a 500 loan.

He was not told it would never pay out because he did not have a family.

And another case shows the need to scrutinise forms before filling them in.

A car hire purchase agreement had the acceptance box for 'optional' payment protection insurance pre-printed with an 'x' in it.

This added 2,360 to a loan of 10,974 for a car which had a cash value of 7,138.

The BBC's Andrew Verity
"The Advice Bureaux say these problems are common"
See also:

21 Nov 01 | Business
Savers holding back on shares
26 Sep 01 | Business
Watchdog tightens financial ad rules
29 Jun 01 | Business
City watchdog targets small print
21 Aug 00 | Business
Online banking gets poll boost
03 Sep 99 | UK
Millions seek debt advice
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