Catalogue debt ‘more serious than payday loans’

The problem of catalogue debt could be far greater than payday loans.

New figures released by Citizens Advice showed it handled 62,000 calls for help regarding mail order debt, compared to 61,000 people who had issued with short-term lenders. The news has prompted fears issues deemed to be less newsworthy are being sidelined in favour of stories that will grab the headlines.

Retailers have been allowing customers to split the cost of items over a period of months or even years in order to get a sale. Although the rate of interest charged is significantly lower than payday loans companies, the repayment structures could see borrowers having to pay double or perhaps triple the face value price.

Debt charities are worried once the new Financial Conduct Authority takes over regulation of the credit industry, it has already set its stall out to go after short-term lenders as a matter of priority. This, they feel, could leave other unscrupulous finance companies free to exploit consumers.

While payday loans companies are often in the media's firing line, catalogue companies have been left relatively unscathed. This is despite research carried out by Which? highlighting mail order companies are behaving just as badly as other rogue lenders.

It found some catalogue credit companies were not being entirely clear about their terms and conditions. Many were simply choosing to advertise the low payment options, instead of advising customers exactly how much they would have to pay once the agreement was over.

In addition, Shop Direct, the group behind Littlewoods, had to make extra provisions this year after it mis-sold PPI policies to consumers. All of this, however, has had relatively little coverage.

The Which? study stated: "Payday loans and unauthorised overdrafts rightly attract significant media scrutiny but more people use catalogues than either of these options and catalogues are not always sufficiently clear about the total cost of credit."

Mail order companies have defended their actions, claiming customers are rigorously checked on their ability to pay back the loan and are offered a variety of different ways to make their instalments. 

By Joe White