Cold callers selling high-risk products should be banned, says charity
Cold callers promoting high-risk financial products, should be banned, according to leading debt charity StepChange.
It’s calling on regulator the Financial Conduct Authority (FCA) and on the Treasury to do more to protect people after its research found that more than half of adults in Britain (29.5 million) receive unsolicited phone calls offering high-risk financial products, while around one in eight are being phoned every day.
Its research also suggests that these calls, which offer products such as payday loans and fee-charging debt management services, have resulted in 1.5 million people taking out one of these products.
A separate survey of the charity’s clients found that a third are receiving more than five calls a week, while StepChange estimates that up to 12,000 of the clients it advised in 2015 had taken out such services, adding an average of £1,052 in high cost credit to their existing debts.
In particular StepChange wants the FCA to ban unsolicited phone calls where someone can sign-up immediately for high-cost credit, and it wants to give additional powers to the FCA to ban firms from carrying out unsolicited promotion of fee-charging debt management services.
It warns that while high-cost credit may seem to offer financial relief and a way to pay the bills in the short-term, once the substantial interest is added and repayments become due, it can heap pressure on borrowers and make their debt problems more entrenched and more severe, particularly if it leads to a need for more credit just to get by.
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Mike O’Connor, chief executive of StepChange Debt Charity, says: “Before taking out any financial product, people need to know whether it is right for them, work out if they can afford it and shop around for the best deal, but unsolicited phone calls can take these key decisions away from them. It is not a good way to sell credit or financial services and it is certainly not a good way to buy them.”
Short-term cash loans designed to be borrowed mid-way through the month to tide the borrower over until they next get paid, whereupon the loan is settled. Generally used by people with bad credit ratings and/or no access to short-term credit such as an overdraft or credit card. Like logbook loans, this type of borrowing is hugely expensive: the average APR on payday loans is well over 1,000% and in some instances can be considerably more.