There are some seriously morally questionable products available in the UK. Now, I know we could talk all day long about the morality in general of credit and lending, but that?s not what I am talking about. I think there?s a place in the world for consumer credit as long as it?s doled out responsibly. What I?m not so keen on are payday loans at over 4000% APR and other products that are, without doubt, somewhat questionable on the moral scale. Here are 5 financial products that, for various reasons, have pretty dire reputations.
1. Payday Loans
Payday loans are designed as short term cash loans, often relatively low in value and often paid back within 40 days or so. While, on the face of it, that might seem like a warranted service, it?s not unusual to find the relative APRs on such short term loans well over 2000% and in some cases even 4000%! Now, you can argue all day long about how irrelevant APRs are on payday loans, but I still think they?re awful.
The market at which these products are targeted is the demographic of people who are already struggling financially ? the ones who need a few hundred quid to tide them over until their next payday. Why, oh why, would we actively push such people into taking such high cost credit out?!
The newspapers and finance blogging community has, in many cases, rallied around in a joint hatred of this type of loan and Martin Lewis of Money Saving Expert notoriously calculated how long it would take to acquire the equivalent of the US national debt by taking out a ?100 loan from one provider.
2. Doorstep Loans
As above, doorstep loans are often short term and relatively low value loans. But to me, someone turning up and knocking on your door looking for your weekly repayment has an air of ?shady? about it. It?s reminiscent of loan sharking! Are we really ok with that?
Apparently, a number of finance experts and writers would agree that we shouldn?t be and reports like this one in the Guardian and this one in the Telegraph?do nothing to enhance the reputation of these products.
3. PPI Policies
Now, PPI in itself is by no means an immoral product. In fact, it should be (in theory) a sensible addition to any loan product at all. PPI, or payment protection insurance, has a dire reputation though and this is down to the fact that it was scandalously mis-sold by some of the UK?s most trusted financial institutions for years and years. This has been massive news in the past few years and has led to banks paying out literally billions of pounds in compensation and reimbursements to people they mis-sold the product to. There have been reports of banks incorrectly telling people they had to have the product in order to qualify for loans, selling them the product without them know it or even selling consumers policies they would never, ever have actually been able to claim on.
You can get the full lowdown on PPI from Money Saving Expert.
4. PPI Claims Management Companies
Not a product, per se, but a service that has arisen off the back of the PPI mis-selling scandal. PPI claims management companies have popped up all over the place offering to help consumers who were mis-sold the policies to claim back from the big evil banks! But of course, this service comes at a cost. It?s not unusual for a PPI claims management company to charge 25% of the total money you claim back (plus VAT). The reason these companies have such a poor reputation is because it?s notoriously straightforward to write to your bank yourselves and many banks blame PPI claims management companies for an increase in claims from people who have no grounds for a reclaims ? thus slowing down the process for those who do have a genuine claim.
Here?s 10 things Money Saving Expert reckon you need to know about claims management companies and here?s an article on the Guardian about how claims management companies were made to change!
?5. Christmas Loans
These are much like payday loans except they are targeted at people specifically looking to get extra cash for Christmas. Am I the only person who thinks encouraging people to take credit out for unnecessary luxuries is completely immoral?
This is Money published a great piece about the long term consequences of short term lending to fund Christmas.
Source: http://listingthings.co.uk/payday-loans-poor-reputation/
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