We don't want you to pay more than double the cost of credit - whether it's a loan to help pay bills or buying a new sofa
MILLIONS of struggling families are stuck paying sky-high interest rates of up to 1,557 per cent to legal loan sharks on our doorsteps and high streets.
Some 7million households turned to high-cost credit such as doorstep lenders or rent-to-own firms last year.
But their customers can easily end up paying back more than double that amount.
Today, The Sun launches its Stop The Credit Rip-Off campaign to help the people on the lowest incomes living in the poorest places and who face paying a poverty premium.
We want firms to put a cap on the total amount of credit so that no-one ever pays more than double the amount of what they are lent.
WE never want you to pay more than double the amount you've borrowed - whether it's for a new sofa or a loan to help pay your bills.
That's why The Sun has launched a campaign calling for a cap on the total cost of rent-to-own loans and doorstep lending at double the original price or loan amount.
A similar cap was introduced for payday loans in 2015 and since then the number of people struggling with unmanageable debts to those lenders has more than halved, according to Citizens Advice.
People on the lowest incomes, living in the poorest places, are paying a poverty premium - up to 7million people have resorted to high-cost credit, according to the Department for Work and Pensions.
People whose wages or benefits don't stretch far enough need to borrow from rent-to-own or doorstep lenders to help pay for things such as an unexpected bill or to furnish their homes.
These come with exorbitant rates of interest - more than 1,500 per cent in some cases of doorstep lending.
It is scandalous that one mum who borrowed cash to help keep a roof over her family's head ended up paying back over THREE times the original amount.
It's time to stop the credit rip-off.
Here's what we demand:
Rent-to-own
Doorstep lending
Hard-up mum-of-three Louise Jankowski, 36, turned to Provident to keep a roof over her children's head when she split from her husband.
Louise, who lives in Guildford, had fallen behind on her rent and was waiting for benefit payments.
She'd previously used the firm to buy vouchers for Christmas.
When her agent came over to her house to collect the £5 she owed for the vouchers she asked for a £500 cash loan, instead she ended up taking £1,000.
"I was so desperate for the cash... I went for it. I was a single mum struggling and I had a child with special needs. I had no choice but to go to them," she said.
"I asked them for the money and the next day the agent came round with the cash in an envelope."
It took her six years to pay back the initial loan. She paid back a total £3,200 - more than three times the original amount.
Mum-of-two Kelly Greenwood, from Burnley, turned to BrightHouse in 2011 after losing her business due to ill health.
“I’d been given a washing machine by an old friend but it had broken down. I was desperate and I couldn’t afford to buy a new one,” she told The Sun.
The 28-year-old bought a Hotpoint washing machine from BrightHouse paying back an estimated £1,286 in total. The original price of the item was £632.
She said: "Every single week they would call me at 9am in the morning before I had even had a chance to pay asking me 'are you paying today?'.
“They even rang me five or six times when I was in a long labour with my eldest son Harry who is now 5.
“My partner picked up and told them I was in labour, but they kept calling.
"I ended up borrowing from family to pay it off because the stress was too much.”
It's unclear if staff knew she was in labour and BrightHouse says it worked hard to ensure she kept the item.
Grandmother, Tracey Jeans, 50, who lives in Edinburgh, has been a customer of doorstep loan firm Provident for 32 years.
She currently has four loans totalling to £2,600 and she claims this leaves her with just £40 a week to pay bills as well as live on.
She said: “I come from a working-class family and they make it so easy to get into trouble.
“They didn’t ask about other loans. They didn’t ask if I had extra income. I think it's irresponsible of them.
“It’s so horrible. Sometimes I just don’t want to be here.”
Rent-to-own purchases have an interest rate of up to 99.9 per cent and typically last three years, meaning customers frequently pay much more than double the original item price.
Doorstep loans can come with interest rates of up to 1,557 per cent, according to Citizens Advice.
And the problem with high-cost credit is growing.
Last week, City regulator The Financial Conduct Authority, warned that household debt is close to the peak seen in 2008 - which played a part in the credit crunch caused by the banking crash.
Bank of England figures show consumer credit for last year was more than £200billion up 9.3 per cent on the year before.
Debt charities including Citizens Advice and Stepchange have seen a rise in the number of people with problems relating to high-cost credit.
New research by Citizens Advice released today reveals that extending an interest cap to cover doorstep lending could save up to £123million in interest payments on over half a million loans per year.
IF you're in serious money trouble then here are some alternative places where you can go to for help:
Credit Unions - These are small not-for-profit groups that help people save and borrow money, and you may be able to get a loan. You can find out which credit union you are eligible to join by searching
Ask for an advance - You can ask your employer to give you an advance on your wages, or the JobCentre Plus may be able to arrange a short-term advance on your first benefit payment.
Foodbanks - These organisations help provide emergency food and toiletries to see you through to payday. You can see if you qualify for your nearest branch .
Check your benefits - Make sure that you are getting all the benefits that you are entitled to using this calculator from the charity .
Freecyle/Facebook groups/Gumtree and eBay - You maybe able to find free or cheap second-hand furniture.
Boost your credit score - If you're never rejected for credit then there are ways to show lenders that you can be responsible with your cash.
Gillian Guy, chief executive of Citizens Advice, said: “High-cost credit products can leave people trapped with unmanageable debt, which can have damaging knock-on effects. The FCA should act to protect people from problem debt - particularly in the home credit and rent-to-own markets.
“There’s no questioning the evidence - their cap on payday lending has been a success.
“It’s concerning that there is currently no total limit on what these consumers repay. A cap would at least ensure they do not pay back more than double what they borrow when they take out a loan or purchase a product.”
Joanna Elson OBE, chief executive of the Money Advice Trust, said: "We believe more can be done to reform areas such as rent to own and doorstep lending where there are very high rates of interest, extra charges often added on, and people can lose essential household items despite paying substantial amounts towards ownership.
"We encourage further tailored action to be taken to address these issues, including exploring a price cap on certain areas and transparency around the total costs involved with each product."
MUM-of-four, Jade Whitworth, 25, has taken out between 30 and 40 loans for items from BrightHouse, including a sofa, fridge freezer and a laptop, over the past six years.
The rent-to-own firm allowed her to rack up thousands of pounds in repayments despite having taken out an IVA - at least nine of the loans were after the FCA clampdown.
She said: “They just kept calling me up and offering me things that I didn't have.
"So even though they knew I had an IVA when they did the credit check, they still let me take more stuff out.
“When my washing machine broke I couldn’t afford to get it fixed or to buy a new one.
“I had to get one out with BrightHouse, even though I couldn’t really pay the other payments.
“I had four young kids, one’s got special needs. They needed clean clothes.
“I couldn’t afford one from anywhere else. I had no choice.”
Sara Williams, debt campaigner who runs the Debt Camel website, said: “Taking a doorstep loan too often leads customers into several years of debt.
“People are encouraged to borrow more and to refinance their existing loans again and again so they never pay the debt off.
“Customers can also feel under a lot of pressure having someone in their home asking for repayments, often in front of the children."
Peter Tutton, head of policy at StepChange Debt Charity, said:"Too many people are facing the impossible choice of either taking out high cost credit or not being able to make ends meet.
"With credit markets failing too many struggling households, there is also a strong argument for the government to support lower cost alternatives, including low and no interest loans and grants for those most vulnerable to lasting harm from problem debt."
Chris Woolard, a boss at the FCA, admits there are problems with the affordability of doorstep lending and rent-to-own.
He told The Sun: “We have taken action already...but there is more work to do.
“The cap on payday loans has significantly brought down the cost of borrowing for many people.
“There are certain parts of the market that are high risk and offering high cost credit to people on the lowest incomes.”
The FCA took over regulating high-cost credit firms in 2014.
In 2015, it introduced a cap on the total cost of credit for payday loans to ensure that customers did not pay double the amount that they had borrowed.
Since then the number of people with unmanageable debts to payday lenders has more than halved.
The FCA is set to reveal a report into doorstep loans and rent-to-own firms in May.
HAVING large amounts of debt can be really worrying. Here are some tips from Citizens Advice on how you can take action.
Check your bank balance on a regular basis - knowing your spending patterns is the first step to managing your money.
Work out your budget - by writing down your income and taking away your essential bills such as food and transport.
If you have money left over, plan in advance what else you’ll spend or save. If you don’t, look at ways to cut your costs.
Pay off more than the minimum - If you’ve got credit card debts, aim to pay off more than the minimum amount each month to bring down your bill quicker.
Pay your most expensive credit card sooner - If you have more than one credit card and can’t pay the balance off in full each month, prioritise the most expensive card (the one with the highest interest rate).
Prioritise your debts - If you’ve got several debts and you can’t afford to pay them all it’s important to prioritise them.
Your rent, mortgage, council tax and energy bills should be paid first because the consequences can be more serious if you don't pay.
Get free advice - If you’re struggling to pay your debts month after month it’s important you get advice as soon as possible, before they build up even further.
Groups such as Citizens Advice and National Debtline offer free advice and can help you prioritise and negotiate with your creditors to offer you more affordable repayment plans.
BrightHouse, Provident Financial PLC, Morses Club and Perfect Home have all emphasised that they provide a service to customers who may not be able to attain credit elsewhere and undertake stringent affordability checks and limit the amount of credit available.
A spokesperson from BrightHouse said: “We made substantial changes to the way we operate, including introducing more stringent affordability checks.
"We don't loan money but instead offer a flexible and affordable way for families to get the everyday products they need."
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A spokesperson from Provident PLC, said: "We’re committed to doing the right thing by our customers. We’ll investigate these cases to find out what has happened.”
Paul Smith, boss of Morses Club, said: "The amount we charge is already less than the levels The Sun is calling for.
The payday loan credit cap is the equivalent to 80p per day per £100 per day. Morses Club charges as little as 23p per £100/day.
It added that it charges fixed interest rates and there are no fees or penalties for late payments. Customers "are not forced into a debt spiral for being unable to make a payment".
The company also check disposable income after verifying income and expenditure. It limits customers to one active loan across all high cost credit providers.
Mike Sweetland, chief executive of PerfectHome, said: “PerfectHome has made significant improvements in order to meet the new standards required by the FCA."
It added that staff do not receive sales incentives, it is transparent about costs and it includes the weekly payment, price of credit, number of weeks, representative APR and total amount payable in stores and online.
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