A Sun investigation reveals how a Morses Club agent offered a £300 loan with a weekly repayment of £15 per week, despite our man having just £16 per week spare cash to live on
A DOORSTEP lender was filmed offering a 65 per cent interest loan to a dad of four that would have left him with just £1 a week to live on.
Morses Club offered a £300 loan to our man with a weekly repayment of £15 per week, despite him having just £16 per week after bills and rent.
It comes a fortnight after The Sun launched its Stop The Credit Rip-Off campaign where we called for stricter affordability checks on lenders.
Debt charities have called on firms to improve these checks, warning that unaffordable credit could push customers into further "financial hardship".
Our man posed as a customer, applied for the loan online and completed a credit check before the firm arranged for a member of staff to visit him at home.
The agent didn’t ask dad-of-four James - whose name we have changed for this story - why he wanted the cash.
An agent for Morses Club called Carl visited the dad of four at his semi-detached home in Burnley, Lancashire, and carried out an assessment of his income and outgoings.
After a 15-minute interview, which our investigators recorded, he was offered £300 on the spot at an interest rate of 65 per cent.
James was told he would make 33 weekly repayments of £15 - totalling £495 - despite the agent calculating he had just £16 spare each week.
He had listed James's outgoings on an iPad at £244 each week while the dad - who's expecting a fifth child next month with his partner - earned just £260 per week after tax.
His outgoings included £30-£40 weekly repayments on credit cards but was not asked about whether he was repaying minimum amounts or the total amount he owed to other lenders.
He was not told the interest rate or total cost of the loan by Morses Club staff until he asked the agent Carl why the repayment figure was so high.
The loan firm agent replied: "I can do it today, I can do it tonight, now if you wanted.
"Did they not explain to you on the phone?
"Your interest rate is 65 per cent."
When James continued to question the level of repayment, Carl said he could take a loan of £200 and pay back £10 per week over 33 weeks.
He said: "But I mean you don't have to have £300. If you wanted something less we could get the repayments down.
"If you wanted £200, that would be £10 a week. Or you can take it over 20 weeks and your payments would be a bit higher.
"It's just high interest, isn't it. It's what they are."
James, who splits his bills with partner Alice, was also told he could use tax credits to "help his case".
He was asked to show ID and a wage slip but before the home visit had been given no other details about the loan by Morses Club - which boasts 230,000 customers across the UK.
Doorstep lenders offer rates up to 1,557 per cent and visit customers in their homes to hand over cash and collect repayments.
Morses Club charges up to 756 per cent interest on a loan over 20 weeks.
Its agents carry out 12million customer interactions each year.
The firm added that its records show that 13 per cent of customers' net disposable income is used to repay loans.
A spokesperson from Morses Club told The Sun: "We take such matters very seriously and will address the issue with the agent concerned.
"If the findings are as reported, we will act accordingly – whether it be a training need or even a case for termination of the agent agreement.
"We are surprised that the customer in question did not know the APR and total cost as these are clearly laid out in the loan agreement that a customer is required to sign."
"It is disappointing to hear of such an incident but we would point out that this is one touch point in many millions and that we have a robust policy and procedure to check and eliminate such isolated problems."
“After viewing this footage, if the potential customer had decided to proceed with the application, our system would have automatically prevented the loan from being issued on the basis that it breached the policies we have in place on the ceiling of use of net disposal income.”
Credit firms are supposed to treat customers fairly and should not target customers with credit that they cannot afford, according to rules set by the Financial Conduct Authority.
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 7 million 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 and 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
Last month, a boss from the City watchdog admitted that debt is very close to its September 2008 peak - before the start of the financial crisis.
He also warned firms to get affordability checks right. He said that firms need to “consider the potential for credit to adversely impact the customer’s financial situation - in other words, that the debt will be affordable.”
An FCA spokesperson said: “We expect all lenders to treat customers fairly and to make sure that their loans are affordable. Failure to do so is irresponsible lending.
"The FCA will take action when firms fall short of our standards, including where they are irresponsible lenders."
It is set to reveal its findings on affordability rules for credit firms next month.
Debt charities believe that affordability checks need improvement.
Gillian Guy, chief executive of Citizens Advice, said: "Affordability checks for doorstep loans are not strong enough.
"We see evidence of companies lending unaffordable amounts to people, many of who are vulnerable or already have multiple debts.
"Creditors must carry out tougher checks, even if the amounts lent are relatively small.
"We want the FCA to take action. Guidance must spell out to lenders what these checks should include - most importantly, physical proof of income and usual spending."
Peter Tutton, from StepChange, said: “It is absolutely vital that credit firms don’t lend to people who cannot afford to meet loan payments from the outset without hardship.”
Joanna Elson OBE, chief executive of the Money Advice Trust, the charity that runs National Debtline, said: “It is crucial that all firms are responsible in their lending to ensure that customers are able to afford repayments without significantly affecting their wider financial situation.
“The regulator’s intervention in payday lending shows that targeted regulation can make a difference in protecting consumers.”
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