Never mind Wonga: Teesside women score victory on high cost lending

Wonga may be sponsoring Newcastle….but one North East community group has scored a massive victory against high-interest credit

A SMALL group of Middlesbrough women who were determined to tackle the huge debt problems on their estates have persuaded the country’s three biggest rent-to-own (RTO) companies to clean up their acts – helping 325,000 low income customers nationwide.

Following 16 months of tough negotiations with the Thrive community group and the Centre for Responsible Lending, Brighthouse, PerfectHome and Buy As You View have signed a new customer charter which outlines commitments to refer struggling customers to independent debt advisers, limit default charges to actual costs, ensure goods are competitively priced and provide more payment options.

In addition, the three firms – who this year made collective profits of almost £45 million – will work towards sharing credit ratings with agencies, potentially allowing their customers to access cheaper, more mainstream bank loans and credit.

The RTO sector, which currently charges up to 49.9 per cent APR on basic goods like washing machines and TVs, has faced criticism from the Officer of Fair trading (OFT) for targeting low-income households who are unable to get credit elsewhere.

According to the OFT’s High Cost Credit Review of 2010, more than a third of RTO customers are dependent on the sector.

Thrive, who were set up by national anti-poverty charity Church Action on Poverty in completed the negotiations with funding from Friends Provident Foundation; their progress has now been documented in a new Centre for Responsible Lending report, ‘Improving Practice in the Rent to Own Industry.’ (http://www.responsible-credit.org.uk/projects/developing-a-code-of-practice-for-rent-to-own-lenders)

Yet despite this progress, the report highlights a need for the new improvements to be properly monitored and enforced; and recommends that the whole sector now signs the charter.

As a full-time guardian for two teenage granddaughters, Thrive member Maureen Hagan, 58, of Stockton-on-Tees, had no savings and was reliant on benefits. She was forced to use PerfectHome and Buy as You View to purchase a new sofa, bed, washer and cooker.

She said: “There’s nowhere else for a person with a bad credit rating or no credit rating to go. Because they won’t have you. My main issue was for them to give us a credit rating. And they’ve got to publicise that rating to other companies to know that we are good payers.

People have listened to me, a normal everyday person. If I’ve helped just one person then I’ve achieved a lifetime’s ambition. Then they’re not going to be in debt like I’ve been in debt.”

We are delighted with the commitments that have been made so far by companies in this sector. They go beyond those contained in the codes of practice of their trade associations and are a real step forwards.

We look forward to working with the firms on an ongoing basis in respect of other issues, including exploring the benefits of data sharing for low income consumers. We are also now looking to Government and the consumer credit trade associations to ensure these commitments are taken up by the entire sector.

David Harwood, Company Secretary at Brighthouse, said: “Thrive has done a marvellous job instigating industry talks in the Rent-To-Own sector. We’re looking forward to continue working with both Centre for Responsible Credit and Church Action on Poverty and sharing best practice going forward.”

With thanks to Helen Clifton @helenclifton for contents of this post.

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