Are you easy prey?

By DAILY MAIL REPORTER
Updated: 19:00 EST, 21 November 2001

CONSUMERS are being ripped off by financial companies because they don't understand what they are buying. A report from the National Association of Citizens Advice Bureaux (NACAB) says consumers are heavily reliant on third-party advice and information in resolving their problems, making them 'easy prey for companies that wish to take advantage'.

The report, Summing Up - Bridging The Financial Literacy Divide, cites the case of an illiterate married man with two young children who took out a loan with a High Street bank for £12,000. The loan application form stated an income (including Incapacity Benefit) of £780 a month with rent of £222 and existing borrowing commitments of £317 a month.

His local Surrey CAB says: 'On these figures it was clearly impossible that he could take on new loan repayments of £337 a month even if this replaced some of his existing borrowing commitments. It seems highly irresponsible of the person granting the loan to do so in these circumstances. The £2,500 for the repayment protection insurance seems particularly inappropriate.'

Author Nick Lord, social policy officer at NACAB, says: 'Some companies don't feel it is in their interest for consumers to become more financially literate because they'll question what they are buying.' NACAB is calling on the Government to launch a ten-year strategy co-ordinating all the different projects to improve financial literacy. It also wants all Government policy and benefits to be 'financial literacy-proofed'.

Independent financial advice should also be made more accessible. It recommends regional directories of financial advisers listing their experience and expertise, whether they offer an initial no or low-cost interview and the range of products they can recommend.

It would also like to see all advisers offer an hourly rate as well as commission-based advice and a low-cost, fixed-fee initial interview for people wanting a general overview of their finances. NACAB suggests a pilot scheme with advisers providing limited financial advice within CABs.

Claire Ball wanted to take advantage of a one-year, interest-free credit offer from Currys when she bought her dishwasher. The machine cost £350 and she was told repayments would be £12.51 a month. 'I said I thought it was a bit low and offered to pay £30 a month but was told the figure was pre-set and could not be changed,' says Claire, 42, from Misterton, Somerset.

After one year, the interest-free credit stopped and she was charged interest back to day one of the loan. Claire offered to pay the outstanding amount of £276.51 but was told that she owed more. 'I eventually agreed a final settlement price with them. I am furious they didn't tell me I could have increased my payments at any time so the loan would have been paid off during the interest-free credit period,' she says.

Currys spokesman Jon Brett says: 'The store staff should have told her that she could have increased her monthly payments. She should also have received a letter one month before the end of the interest-free period, telling her she could repay the full amount.'

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