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18/01/2010

Ban point-of-sale store card sales to protect the vulnerable, says insolvency trade body

Financially unqualified shop staff should be banned from selling store credit cards, according to insolvency trade body R3. Ahead of the closure of the Government’s credit card consultation tomorrow, insolvency experts warn that this practice contributes to the mountain of personal debt in the UK and entices vulnerable customers into debt.

R3 President Peter Sargent commented: “It is frankly irresponsible to sell credit over the shop counter as though it is no more important than buying a sandwich. Without proper training, shop assistants are inappropriately qualified to understand the consequences of what they are selling and often commission driven. While these cards are presented as innocuous, they can lure vulnerable people into debt. They should only be sold by people who have been sufficiently trained to sell financial products.”

A recent poll finds that the majority (72%) of Insolvency Practitioners believe it is too easy to get a credit card and two thirds (66%) have seen cases where people have signed up for store credit cards without any understanding of ‘what they had let themselves in for’. Case studies show individuals with unsecured debt of £300,000 and others with more than 30 credit cards at one time.

Peter Sargent concluded: “We broadly support the consultation which is considering raising monthly minimum repayment rates. This measure would encourage people to see store credit cards as short term credit rather than ‘a long term way of life.’”


Case Studies:

  1. A 43 year old professional woman from the North West had 15 credit cards and store cards/catalogues. She owed more than £85,000 on an income of £25,000pa. When credit became tighter and she was unable to continue recycling debt, she hid the problem from her husband until bankruptcy loomed.

  2. A couple aged 29 and 30 with two small children needed new toys and clothes. Using 10 store cards to cover for a deficit in their income, they ran up a combined debt of £150,000 on store cards.

  3. A 62 year old director of a company could not get further business loans as his applications for funding had been properly assessed and declined. He was able to get £53,000 on 0% credit cards. He now faces immediate bankruptcy as the downturn in the economy has caused his business to cease to trade and he has no income to meet the payment requirements of the cards.

  4. A bankrupt male (30, married) whose credit/store card debt (more than 20 cards) exceeded £125,000 out of total £384,000 debts (mortgage £234,000) lost his good job in IT. A classic case of increasing debt following postal marketing of "new card no questions." Debtor admitted it was wrong to apply for the cards but as he was living beyond his means, it was an easy way out until the monthly minimum payments became too large to settle all at one time.

Note to editors: R3 conducted an online poll of 300 Insolvency Practitioners who work on personal insolvency between 8 and 17 January 2010.

 


R3 Press Office

Notes to editors:

  • R3 is the trade body for Insolvency Professionals and represents the UK’s Insolvency Practitioners.

  • R3 comments on a wide variety of personal and corporate insolvency issues. Contact the press office, or see www.r3.org.uk for further information.

  • R3 promotes best practice for professionals working with financially troubled individuals and businesses; all R3 members are regulated by recognised professional bodies
     
  • R3 stands for 'Rescue, Recovery, and Renewal' and is also known as the Association of Business Recovery Professionals.