‘Senseless’ housing policy of offering unfurnished council homes is fuelling high-cost credit rip-off, warns finance watchdog
Financial Conduct Authority chief Andrew Bailey has slammed ministers for pushing tenants towards taking out costly loans
THE "senseless" social housing policy of offering tenants unfurnished council homes is pushing poor Brits towards high-cost loans, the head of a finance watchdog has warned.
Andrew Bailey, chief executive of the Financial Conduct Authority, said that it made "no sense" to be providing tenants with homes without essential furnishings.
He hinted that tenants were being driven to take out high-cost loans to buy cookers and washing machines - at three or four times the cost of ordinary goods.
In a speech on credit yesterday, he said: "It makes no sense at all surely to create a well-developed social housing system but leave tenants to provide essential furnishings and fittings at a cost which can be three or four times the ordinary retail price of these goods."
And he hinted that the FCA may not extend a cap on payday loans to cover doorstep lenders and rent-to-own goods - which both The Sun and Citizens Advice are campaigning for.
Bailey said: "We are examining a range of potential approaches to address the harm we see to consumers using these products, and I expect to set out our views in the next month... but that does not imply that our solutions for different markets will be the same."
We have highlighted the plights of thousands of Britain's poorest people who use rent-to-own firms such as BrightHouse and PerfectHome.
They frequently end up paying more than double the original item price due to interest and costly add-ons such as insurance policies - which in some cases have cost FIVE times more than available elsewhere, our investigation revealed.
One mum-of-two claimed she was chased for washing machine repayments while she was in labour.
Our Stop the Credit Rip-Off campaign is demanding that no one ever pay back more than double what they borrow.
After the same rule was introduced for payday lending in 2015, the number of calls made to Citizens Advice about problem payday debt more than halved.
In delivering his speech, Mr Bailey concerned charities by seeming to focus on a warning about the lack of public knowledge about alternatives to high-cost credit instead of tightening rules on lenders.
He said officials were "willing to do everything in our power to help" spread knowledge of the other options out there for people who are struggling with money.
Why we want to Stop The Credit Rip-Off
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
- Cap on all repayable costs at double the item list prices (including fees, add-ons and interest)
- Ban on incentives for all sales staff
- Ban on discounts for existing customers to tempt them into more credit
- Companies to publish example interest rates and costs on all payment options
Doorstep lending
- Cap at double the original amount borrowed
- Stricter affordability checks
- Ban on discounts for existing customers to tempt them into more credit
It's time to Stop the Credit Rip-off.
Gillian Guy, Chief Executive of Citizens Advice, told The Sun the FCA must do more to stop vulnerable Brits falling into debt.
She said: "Alternative options to high-cost credit products will not help everyone and do not replace the need for better protections for rent-to-own and doorstep loan customers.
"The FCA needs to make sure people are protected from falling into the problem debt trap these products can create.
What could be done to help social housing tenants?
Sara Williams of the award-winning money blog Debt Camel says landlords could be part of the solution.
"People getting a council or housing association tenancy normally get just bare rooms that they have to furnish quickly so it can be a home for their children," she says.
"All too often, the only place they can get credit is places like BrightHouse.
"If social landlords could offer people the chance to buy some essential goods such as washing machines at a good price and with affordable repayments, this would be a huge help."
"We know these agreements can become impossible to manage when repayments are missed. High interest rates, costly late payment fees and add-ons such as insurance mean the costs can rack up fast.
"As the regulator, the FCA needs to step in and cap the total repayments people make on rent-to-own and doorstep loan agreements - like it successfully did with payday loans in 2015.
"It must also give lenders stronger guidelines on the affordability checks they carry out - for example requiring proof of income and expenses - to make sure people are only being lent an amount they can afford to repay."
MOST READ IN POLITICS
And Campbell Robb, Chief Executive of the Joseph Rowntree Foundation, added: "It’s not right that if you are on a low income, you can end up paying huge amounts for the essentials we all need in a home.
"This is how people become trapped in poverty: huge debts pile up on those who already live on very little.
"Andrew Bailey is right that this makes no sense in practice, but it is also morally wrong.
"A tide of rising prices, frozen benefits and low wages, are sweeping people into poverty. There needs to be much better access to affordable credit, to ensure families can stay afloat."
A Government spokesperson said: “People experiencing financial hardship have a range of local and national support options available that can help in setting up a home, including budgeting advances, interest free loans and targeted support from local councils.”
We pay for your stories! Do you have a story for The Sun Online politics team? Email us at tips@the-sun.co.uk or call 0207 782 4368 . We pay for videos too. Click here to upload yours