Rent-to-own deals ‘morally bankrupt’ - Money - News - Moneyfacts

News

Rent-to-own deals ‘morally bankrupt’

Rent-to-own deals ‘morally bankrupt’

Category: Money

Updated: 30/12/2011
First Published: 29/12/2011

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.
Deals where consumers pay for goods over a period of time and end up owning them out right – known as rent-to-buy – have been described as morally bankrupt.

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:

  • Giving the right kind of help when it's needed by ensuring the poorest have access to low or free-interest loans and advice when they face emergencies;
  • reducing demand for high-cost credit by encouraging the poorest families to save up for essentials rather than borrow for them; and
  • ensuring that all have fair access to mainstream financial services either through a bank or post office card account.

Find the best savings rates for you - Compare savings accounts

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

Related Articles

New Year tips to improve children’s money skills

How many have better budgeting as their New Year’s resolution? As with many things, these skills are best learned when young, so Lemonade Money has come up with some tips to help parents make their children more financially savvy.

Money worries lead to Christmas on credit

Money worries are putting Christmas at risk for up to five million Brits, with 10% saying they regularly worry about money in the lead up to Christmas, and the same proportion feeling stressed about how much they are spending.

Would you spend more for a character property?

We all have our own ideas of what makes a dream home, and for many, character features are at the top of the list. But how much more would you be willing to pay for those kinds of additions – and could they even help you save money in the future?
 
Close