Consumer magazine calls for Office of Fair Trading to make sure retailers lend responsibly
Graduate earning £1,000 is offered £2,750 in store-card credit
Published:
An indebted graduate was offered nearly £3,000 of store-card credit in two days despite earning less than £1,000 so far this year, according to an investigation by consumer magazine Which? Money
The 21-year-old graduate, who has nearly £19,000 of student debt, was offered six store cards by high-street retailers with credit totalling £2,750.
The graduate posed as a customer in 20 high-street stores, where he bought items costing between £50 and £100 and asked if he could get discounts if he took out a store card.
Despite having 12 credit checks carried out over two days, he was still able to get credit at the end of day two.
Eight out of the 12 stores where he applied for credit filled in the forms containing their terms and conditions for him, only asking him to sign the form at the bottom, which the magazine said did not give him a chance to read the small print.
Only one of the stores where he applied for a card warned him that he would be checked for creditworthiness.
The interest rates charged on the credit ranged from 18.9% to 28.9%, and in one case it would have taken him nearly 21 years to clear the debt if he had made only the minimum repayment each month. Bhs initially offered him a store card with £100 credit, but then sent him a credit card with a £1,500 credit limit, although it had mistakenly used the name of his street for the name on the card.
Which? Money editor James Daley said: “No one in his position should be given access to £2,750 on store and credit cards in just two days, or be able to continue getting credit after so many applications have been made in such a short space of time. The question remains whether stores should be handing out credit at all. If shops can’t lend responsibly, then the Office of Fair Trading should step in to make sure they do.”
The group is calling on retailers to work more closely with credit-reference agencies to ensure they know customers’ circumstances better before they lend to them.
Consumer Minister Kevin Brennan said: “Last month I called on credit and store-card companies to clean up their act. We are taking action to help ensure people don’t feel as if they have been exploited or disadvantaged by complex and confusing terms and conditions.
“We will be introducing new requirements to explain products to consumers more fully and make it an obligation for these companies to check more thoroughly the creditworthiness of their customers.”
