Those who struggle to buy home furniture and electrical goods are being let down by ‘rent to own’ firms, who in turn are financed by some of the leading high street banks.
The slick advertising is designed to entice adults, often single parents, who may be unemployed and are facing a bleak money time, to have goods without realising the true cost they will pay. Such firms are not regulated in the interest rate they can impose, which can be truly mind-boggling.
The children’s charity, Barnado’s, calls the practice “morally bankrupt”. Such finance plans are generating over £7,500m annually.
Small weekly amounts on fridges, TVs, beds and washing machines can quickly add up. One calculation is that a fridge freezer which sells for £300 will more than triple in cost when insurance and service charges are included.
Some firms operate stores where regular payments are made whilst a minority fund their rental goods and forced other charges by a coin box, whose contents is collected by a visiting employee.
Buy As You View, established in 1972, quotes a staggering 49.9 per cent APR, saying it needs no deposit and makes no credit checks. It is backed by Lloyds, Barclays and Royal Bank of Scotland. Since two of these banks have substantial state ownership, Whitehall can step in to exert pressure.
Caversham Finance, trading as BrightHouse, is the industry leader. It changed its name from Crazy George 10 years ago and quotes 29.9 per cent APR as a “representative” rate.
It claims that without its help, essential household articles would be out of reach to many low income families. So many of the sector’s customers are on benefits and close to the poverty line. Making enormous profits from the most vulnerable members of society and with little competition, expansion plans are afoot. BrightHouse is planning to triple in size.
Many question if the interest rates imposed are defensible and if compulsory high premium ancillary charges are necessary. Such finance houses are clearly pushing vulnerable people yet further into a spiral of debt.
It’s time for the Government to step in.