Page last updated at 01:57 GMT, Tuesday, 28 July 2009 02:57 UK

Call to regulate doorstep lenders

Money on desk
Barnardo's wants banks to do more to help low income families get credit

Children's charity Barnardo's is calling for an investigation into the methods used by high-interest lenders.

It says new regulation is needed to curb "extortionate" interest rates and prevent firms deliberately targeting poor and vulnerable families.

In its Counting on Credit report, it cites Provident Financial, the UK's biggest doorstep lender, claiming it charges interest of up to 545% APR.

A Provident Financial spokeswoman said it was "a fair and transparent lender".

The company is due to publish figures on Tuesday which are expected to show that the number of borrowers using its service has risen this year.


Loan companies have become more popular during the last few years as people have increasingly struggled to get credit from banks or building societies.

But Barnardo's says taking out such loans often plunges families into "worrying levels of debt".

Giving the example of Provident Financial, the charity says "its extortionate interest rates are typical of many doorstep lenders which will continue to flourish unless the government steps in".

Parents can't afford the basic necessities for their children, so are forced to borrow
Martin Narey
Barnardo's chief executive

For a £500 loan from Provident Financial, Barnardo's claims the total amount repaid over 31 weeks would be £775 - a 365.1% APR (annual percentage rate).

And for a £500 loan over 23 weeks, the total repaid would be £747.50 at 545.2% APR, the charity said.

While not illegal, chief executive Martin Narey said these companies were deliberately targeting "desperate" people.

"Barnardo's has studied poor families across the UK and listened to the same story over and over," he said.

"Parents can't afford the basic necessities for their children, so are forced to borrow.

"Banks don't want their custom; they are turned away and excluded from access to everyday overdrafts and loans with reasonable interest rates, so they are left with no choice but to take what they can get."

'No extra charges'

Provident Financial said ministers had already announced a review of high-interest lenders.

"We welcome the government's efforts as we are confident it will show Provident Financial to be a fair and transparent lender, with a business model proven to support low income households through the economic cycle," a statement said.

The company said it gave customers "an absolute guarantee" that they would not face any extra charges, "even if they miss repayments and are late in repaying their loan".

And it added: "APR is widely known to be a poor measure of short term, small sum credit and is not well suited to describing Provident's loans."

Barnardo's has submitted its plea for greater regulation to the Office of Fair Trading.

It is also calling on banks to make it easier for people to meet the identification requirements needed to get credit, even if they do not have a passport or driving licence.

And the charity wants banks to make public details of how many accounts they offer to low income individuals in deprived areas.

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