TAKE AN INTEREST IN FINANCE COMPANIES' TERMS AND CONDITIONS; the Readers' Champion

Article excerpt

Byline: LESLEY CAMPBELL

BRADLEY, from Glasgow, borrowed pounds 300 from a finance company when his employer accidentally paid him less than they should have.

He knew he'd have to pay back pounds 390, but since he'd get pounds 1100 in wages, he didn't worry. However, things didn't work out as Bradley planned.

He lost his job and realised he wouldn't be able to pay off the loan within the agreed time frame.

He decided to roll the loan over for another month and handed over another pounds 90. What had originally seemed like an expensive, but quick and easy solution, turned into a major problem because of the interest rate involved.

Finance companies say their high interest rates are because people who take out these loans are generally the lowest paid and the desperate.

As a result, they're the most likely to default and leave the loan company with bad debts.

Even if this sounds somewhat unconvincing - an annual interest rate of 2339 per cent gives a substantial cushion - the companies don't

hide the terms and conditions from borrowers.

These companies may be legal but that doesn't make them ethical. And with just six companies in the field, there's not enough competition to keep rates low.

Most people who are desperate for cash will agree to pay just about anything and the Government is turning a blind eye to this.

It does offer crisis loans through its Social Fund which incur no interest, but they are discretionary.

Last year, the Government proposed making loans available through credit unions: "Interest would be charged, but this would be at affordable rates compared to those charged by commercial lenders."

This thinking was quickly revised when there was outrage at the idea of charging interest on crisis loans. The Government backtracked and explained that while it wants to work with credit unions, it will not charge interest on loans and is considering relaxing the criteria for loans. …