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Sunday, June 08, 2008

The cost of money

I was shocked this week when a constituent passed to me a loan offer she had received unsolicited through the post. The offer came with a typical APR of 183.2%.

'Provident Personal Credit' state that a loan of between £50 and £800 is available. I contacted the company and discovered that the total re-payable on an £800 loan over 56 weeks is a staggering £1,344 with repayments of £24 a week, a charge of £544. The advert also states that the unemployed are welcome to apply.

The most expensive loan detailed on a price comparison website charged almost a third of the price and had lower monthly repayments. The total charge was £191 instead of £544, and this was for someone with a 'poor' credit rating.

This advert tries to convince people of the affordability of loans by disguising the repayments as weekly. It is incredibly irresponsible to invite someone who is unemployed to apply for a loan which they would struggle to repay. £24 a week is £98 a month.

My concern is that with credit from legitimate lenders becoming increasingly hard to come by during the 'credit crunch', those who need cash will be forced to turn to companies such as Provident. They are preying on the poor and attempting to disguise an incredibly uncompetitive product as fair value.
Well done Peter for bringing this issue to light. This company is an absolute disgrace and, yes, they do prey on the vulnerable. I have had personal dealings with this company:

When I first met my wife, she was a single mother struggling to bring up 2 young children on £100 a week. Of course, this was nearly 10 years ago but at the time she was paying £20 a week to Provident for a "desperation" loan taken out at Christmas for £500.

The first thing I did was to pay off the loan immediately and tell them to never ever come back and "How dare they prey on the vulnerable, etc". I was lucky in that I was in a position to do this. I fear for people who are in the position where they have to pay a quarter of their income to what can only be classified as a loan shark.

Anyway, the point i'm making is that they have been getting away with this for years with many, many, people being affected. Surely, there are regulations to prevent this extortionate abuse, and protect those in society who are vulnerable to this kind of "scam"
Hm, I hope you will pass it to the Office of Fair Trading.
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