A new report from Barnardo's has revealed what it has called the 'scandal' of credit providers who charge low income families up to two and a half times (150%) more to rent-to-own basic household items such as cookers or fridges than it would cost to buy them at full price from a high street provider.
For example, at hree-year rent-to-own arrangement with a well known weekly payment store could mean a family paying in excess of £1074 for a standard fridge freezer, whilst being unaware that it would cost the much lower price of £430 to buy the same product outright on the high street.
The charity has called on the Office of Fair Trading to enforce stricter rules on credit providers that would compel them to display the high street equivalent of the products they sell.
There is a concern that the poorest families are being forced into rent-to-buy deals as they may be excluded from vital financial services such as current accounts.
Around one in ten households with an income of between £100 and £200 per week do not have bank accounts, compared to one in 50 with incomes between £500 and £600 per week.
"In these tough economic times, the most vulnerable families in society are being lured into an unaffordable debt trap by a morally bankrupt lending industry," said Anne Marie Carrie, chief executive of Barnardo's.
"Preventing families from resorting to exploitative rent-to-own agreements involves providing both good financial advice and fit-for-purpose bank accounts for those living on the tightest budgets."
To help tackle the problem the charity is calling on the Government to adopt three key strategy pillars:
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