Instead, they are crippling the poor with debt. So says the Competition Commission which will quickly and clearly point out that what these outfits are doing is plain wrong.



What these companies have become, the commission is likely to tell you, is sharks - predators which prey on the most vulnerable in society because they earn the least and have no other way of gaining credit.

It is a sad fact that time and time again these outfits are reportedly charging up to 1000% interests per year for loans. That's what the Competition Commission is telling us, despite how unbelievable it might sound. Let us for a minute put this into context. The more reputable firms charge 177% and that figure in itself is unbelievably high.

The worst part is there are supposedly 2m Britons buying into these sorts of arrangements. This is for the sole reason that they have little money and the outfits who lend cash on your average high street would never dream of letting them through the front door.

But finally the commission is saying enough is enough and taking a stand. What it is doing is making it clear and publicly known that there is no way that interest rates of 177% let alone 1000% can be justified.

It is looking to force these rogue outfits to spell out how much the loan will cost one of its customers. The hope of doing this is that customer might just do a double take when they realise if they borrow £100 the pay back amount will be £200.

Next on the to do list when it comes to tackling rogue money lenders is threatening them with a maximum legal interest limit if they do not back off with the unfair tactics. What this means is that if they then go and rake up the interest rates to extremes, they will be committing a criminal offence.

There are about five main players in the UK who work the home credit industry – one of them has half of the market share – and there's another 500 which have a smaller amount of the business.

Their customers? Usually single parents, who live in areas of high deprivation. Debt collectors turn up at their front door for the payments – usually once a week or fortnight.

You might be thinking to yourself that those who have little money are a high risk and that the debt collectors are within their rights to charge the high interest rates.

But rates as high as 1000%? Or even 177%? One could argue that nothing justifies rates that high.

One of the money lenders in the market, Provident Financial, says they offer credit cards with interest rates of 70%. But right from the start the customer knows exactly what they are getting into.

With the agreement comes the statement “customers are not being overcharged for their home credit loans, nor is the home credit sector making excessive profits.”

But take this back to the Competition Commission and ask them whether they agree with this statement and they'll tell you they don't agree.

What the Commission wants, and plans to get, is for rules to be in place to bring down the interest of these loans and force these ‘loan sharks' to spell it out in full what is the cost – the real cost – of the loan. Right at the end when it's all paid off so at least the customer knows what they are entering into.

New rules released by the commission are supposed to be due out in summer.

And when the new rules are out, the Competition Commission hopes that people will wake up to how much they are forking out to pay for this cash up front and they'll start to shun these types of loan companies like the plague. And the only ones left standing are the ones prepared to play fair.