Children's charity warning on debt

Barnardo's has called for an investigation into high-interest lenders

A children's charity has called for an investigation into the practices of "high-interest lenders".

Barnardo's made the plea to the Office of Fair Trading in a new report called Counting on Credit.

It said a year-long study into child poverty had found that families were plunged into "worrying levels of debt" by taking out high interest loans.

Provident Financial, the UK's biggest doorstep lender, which is used largely by poor families, charges interest rates of up to 545% APR (Annual Percentage Rate), Barnardo's claimed.

"Its extortionate interest rates are typical of many doorstep lenders which will continue to flourish unless the Government steps in," the report states.

The charity's chief executive, Martin Narey, said: "Many parents turn to high interest money lenders in desperation. Barnardo's has studied poor families across the UK and listened to the same story over and over. Parents can't afford the basic necessities for their children, so are forced to borrow.

"Banks don't want their custom; they are turned away and excluded from access to everyday overdrafts and loans with reasonable interest rates, so they are left with no choice but to take what they can get."

Barnardo's said it wanted to see banks make it easier for individuals, particularly those without either a passport or a driving licence, to meet identification requirements, and to publish data on the extent to which they offer accounts to low income individuals and in deprived areas.

And it urged the Office of Fair Trading to produce new regulations for the protection of borrowers.

Barnardo's gave examples of Provident loan calculations. It said that for a £500 loan over 31 weeks, the total amount repaid was £775 at 365.1% APR. And for a £500 loan over 23 weeks, the total repaid was £747.50 at 545.2% APR, the charity said.