Episode 16 Rip Off Britain

We asked you to tell us who has left you feeling ripped off,

and you contacted us in your thousands, by post, e-mail,

even stopping us on the street.

And the message could not be clearer...

There's too much focus on profit and less on customer care.

It's so hard to complain. Companies make it so difficult to complain.

You told us, with money tighter than ever,

you need to be sure every pound counts.

All my money is very heard-earned, so when I go to spend it,

I expect value for money.

So whether it's a deliberate rip-off,

a simple mistake or a catch in the small print,

we'll find out why you're out of pocket and what you can do about it.

Your stories, your money.

This is Rip Off Britain.

Hello. It's good to have you here again on Rip Off Britain

because this is the series that is definitely on your side

in the battle to get you value for money.

And to make sure that when you sign on the dotted line,

you really do end up with what you expected.

Which, I have to say, is not what happened to the people whose

stories we're going to be hearing about today.

Yes, one way or another, they've all got into trouble with the sort of businesses that

have flourished, while the rest of the country has been having

a really tough time financially.

We're talking here about payday loan

and debt management companies.

They can seem like the answer to your problems,

but sometimes, I'm afraid, they only add enormously to them.

Yes, the payday loan industry in particular has

come in for a barrage of criticism in recent months,

so we'll find out how much of that is deserved,

and we'll see what alternatives there are

if you're desperate to get your hands on some money, fast.

Coming up, how payday lenders could end up chasing you for money

that someone else has managed to take out in your name...

What was your reaction?

I couldn't believe it.

I didn't know what to do.

You never think something like that's going to happen to you.

..the company that promised to get this woman out of debt,

but only succeeded in making her worse off...

I spent a lot of time crying on friends', family's shoulders

because I just didn't know which way to turn.

..and more advice handed out at our pop-up shop.

Do you need a few pounds to tide you over until payday?

Happy to pay that bit more for your loan?

But also happy to be misled, given a loan you can't afford?

Encouraged to take it for longer than you intended?

Then chased aggressively when you get into trouble?

Well, a payday loan could be just for you.

That was the damning appraisal by the Office of Fair Trading

of at least some payday lenders.

Earlier this year,

they told the industry's 50 biggest firms to clean up their act.

So does this mean Britain's most controversial lenders will

change their ways?

I've come to the Office of Fair Trading to find out.

David, we started on Rip Off Britain

investigating payday loans as far back as early 2011.

The question is, why has it taken so long to crack down?

The first thing the Office of Fair Trading had to do was

establish the facts.

What we realised early on was that many people had sometimes

very strong views about the payday industry -

the good about it and, largely, the bad about it.

But when we came to look for hard, factual evidence,

we found there was very little.

So what we did was,

we did an in-depth inspection of the 50 leading payday lenders.

We estimate they account for about 90% of the market.

Amongst the concerns that led to the review

were the ways in which lenders target customers

and sell their loans,

and whether enough checks are made to see

if borrowers are capable of keeping up with repayments.

Often, the adverts are very misleading.

The way they advertise the loans are very misleading.

Too often, the payday lenders don't give borrowers all the information

they need up front to make an informed decision.

Very importantly, all too often payday lenders don't check

whether a loan is affordable for a particular person.

So affordability assessments are absolutely crucial.

How have you tolerated that for so long

when you know this practice is going on?

Well, we don't tolerate it, is the point.

Once we have the evidence which we now have, that the payday lenders

were not doing the affordability assessments,

we have cracked down hard upon them.

But in practice, they're not.

If they are not still doing the affordability assessments, then the

OFT team will not hesitate to take enforcement action against them.

If necessary, we will remove their consumer credit licences

and they will be out of business.

It was affordability that caused problems for Elizabeth Matthews.

Elizabeth was a full-time carer for her mother,

but when her mum passed away

and Elizabeth's carer's allowance stopped,

she found it very hard to find work.

It's much more difficult to find work cos I'm older now, as well.

When I used to work, jobs used to be quite easy to get.

So Elizabeth signed on, but found it difficult to make ends meet.

When you've been out of work for quite while, it really is difficult.

Without the support of my family, I don't think I could have got through.

Slowly, Elizabeth found she was struggling to get enough

money together to pay the bills.

I could pay certain things off, then I had no money for food.

And then I was getting my utility bills in and I couldn't pay them.

And it was very worrying.

Elizabeth needed cash fast, and with few other options,

she took out a payday loan.

I first saw payday loans advertised on the television.

I used to watch them and think, "I would never get one of those."

And then, suddenly, I think, "Oh, I'm going to need some help here."

I applied for the loan on the internet, and I think it

takes about 15 minutes and then they say you've been accepted or not.

It's quite easy, cos you don't talk to anybody,

which makes it even easier.

Because Elizabeth was so confident she'd find a job, she ticked

the box that said she was employed, and the loan for £400 was approved.

Oh, I'll have a job at the end of the month, surely - four weeks

and I'll be working again so I can pay them off.

But four weeks flew by and Elizabeth wasn't able to find work.

When it was coming to the end of the four weeks

and I realised the money had to be paid back, I was so worried.

I couldn't sleep, I felt really anxious.

And it was with me 24 hours a day.

I think, "How am I going to pay this money back?"

Elizabeth did mange to pay back the loan,

but it put her in even greater financial difficulty.

So before long, she was forced to take out a new loan.

With no job and just a basic income, Elizabeth struggled to make

ends meet and make the repayments on this second loan.

I saw another payday loan company and I thought, "That'll expand it

"for another four weeks, I can borrow some money off of them."

So Elizabeth took out a third loan from a different lender.

As with the last two loans,

she thought she would be able to find work by the end

of the month, so she didn't tell the lender she was unemployed.

And when no job materialised,

Elizabeth's finances got worse still, so she took out another loan.

I knew when I took out the fourth loan it was really getting

ridiculous and that I was getting myself into a lot of trouble.

What started as a loan of a few hundred pounds

had now spiralled into thousands.

Faced with debt she couldn't manage,

Elizabeth went to her local Citizens Advice Bureau for help.

The CAB were really good.

They helped me make out a pay plan, so I told them loans that I had,

the money that was coming in, the money that was going out.

'And then they worked out how much I could afford to pay

'back to the payday loan companies.'

And they were informed about this and they accepted the offer.

'And thanks to this advice,

'Elizabeth's debt is now under control.

'She still has debts with a number of payday lenders,

'but they've frozen

'the interest and agreed to let her pay them back in manageable chunks.'

When I walked out the CAB, I felt I had a great weight

taken off my shoulders.

Elizabeth admits she lied by telling the lenders that she had a job,

but says that sheer desperation led her to do it.

It's a terrible feeling, being in debt.

It's not only humiliating but it's very worrying as well.

I mean, you can't buy things that you normally used to buy

and you have to count every penny that you spend.

At least one of the lenders that Elizabeth borrowed from has

told us that she wouldn't have been approved for a loan

if they had known that she was unemployed.

They point out that when Elizabeth applied,

she passed their credit checks and had a good credit history,

so there was no reason to reject her application.

They also say that they take all applications in good faith

and they can't be held accountable

for lending to people who fail to meet

their repayments if that person lied when they first took out the loan.

But that's not always the case.

Some payday lenders do offer loans to unemployed people,

as long as they say they can comfortably afford the repayments.

It's cases like these that lead industry critics to say that

loans are just too simple to get hold off.

Russell Hamblin-Boone,

chief executive of the Consumer Finance Association, which is

the umbrella body for about 60% of the industry,

is confident that most lenders get it right.

We do all of the same checks as any other credit provider,

whether it's for a credit card or a bank loan.

The difference is not in the speed of the application process,

it's in the speed of the delivery.

But you can't, in that period of time, get documents that prove that

somebody can pay back a loan.

It's impossible to do it in ten minutes.

For the majority of people,

the information's held by credit reference agencies.

If you have a more difficult case where you have to get

the paper documentation, then that's what's requested.

The most recent report from the Citizens Advice Bureau,

they actually carried out this survey on payday loans.

From 113 different lenders,

87% did not ask the borrower to

provide documents to prove they could afford to repay the loan.

That is a huge proportion.

It depends.

If you're online, it's difficult to ask somebody for documents -

that's why you use a credit reference agency that have

got the data available electronically.

And I don't know

whether they're asking that question of people online.

In store, of course, you have to provide the documents.

What checks do you carry out then,

to make sure people can afford to pay it back?

For example, you've got to have a job.

You won't be lent to if you're on certain benefits.

We use credit reference agencies and churn thousands of pieces of data

very quickly, because the technology exists to be able to do that.

Your industry has taken such a bashing recently from everybody -

from MPs, from charities and even the Archbishop of Canterbury.

And, of course, the Office of Fair Trading.

How have you reacted to that, as an industry?

The first thing that we did, towards the back end of last year,

was put in place standards through a code of practice.

We've now capped the number of times you can extend your loan,

so you can only extend your loan three times.

We've put in place a freeze on fees and interest

if you get into financial difficulty.

Earlier this year, the Office of Fair Trading gave the big lenders

a deadline, to make sure that they follow the rules.

Since then, 19 of those companies have pulled out of the market.

And the whole industry has been referred to the

Competition Commission for further scrutiny.

It's something, Elizabeth thinks, can't happen soon enough.

I think payday loans is a good thing as long

as you know you can afford to pay them back at the end of the month.

Don't be sucked into them,

because they are very easy to get, and I think that's what makes

it easier for people to fall in the trap of getting payday loans.

They think it's going to be very easy to pay them back

at the end of the month, but that's not always the case.

Our next story has two of the biggest issues

that the authorities are

currently worrying about rolled into one.

That's identity theft and payday loans.

Now, you would assume that if you've never taken out a payday loan,

you will never be asked to pay one back.

But if someone steals your identity,

you may well find that they've used it to get their hands on some

easy cash, and then it is you that ends up being chased to pay it back.

They're the best-known payday loans company in the business.

But it seems that not all of the money that flows through

Wonga's systems is as straight as the company might like.

Some people who have never used a payday loan company

have faced demands from Wonga for repayment.

Or worse, they've had money taken out of their bank account.

Thanks to fraudsters,

they've been saddled with someone else's debt and, as a result,

they're being chased for hundreds, indeed in some cases

thousands of pounds that they certainly do not owe.

Student Victoria Thornley is just one of the people that it's

happened to.

She was baffled to receive a missed payment letter from wonga.com

saying that she owed them over £500.

But she'd never taken a loan with them, so didn't owe them a penny.

I was down at university and my mum rang me and was shouting,

"What are you doing, taking out loans?"

Obviously, I hadn't.

I'd received a letter through the post to my home address and it was

saying I'd taken out just under £500, um, loan with Wonga,

that I hadn't paid it back in time and I owed them about £590.

What was your reaction?

I couldn't believe it.

I didn't know what to do.

You never think something like that's going to happen to you.

Victoria called Wonga, and it quickly became clear that she

knew nothing about it, she'd been a victim of identity theft.

Someone, somewhere had set up an account

and taken out a loan using her details.

They'd pocketed the cash, but she'd been hit with the bill.

When they were asking me my details on the phone, obviously

something I'd never given them, they were asking my date of birth

and I was telling them and they were saying, "Yeah, that was correct. Your postcode's correct."

And it's just crazy that somebody can get all that information

about you, that I'd never given them before.

They told me I had to ring the police, get a crime log number, which I did.

Then I had to ring them back, at my expense,

and they said it was going to be 48 hours.

I never heard anything back from them so I had to ring them back

a couple of days later and they told me that they'd lost my phone number,

and that I would have to wait another 48 hours for them

to sort things out again.

Eventually, Wonga called Victoria and told her that the account,

mysteriously opened in her name and with her contact details,

had been closed down.

But just two months later,

she received yet another letter from Wonga demanding repayment

of £263 for a new loan, which, again, she had not taken out.

If somebody had tried to open another account, why hadn't it flashed

up on the screen, "This account's been done for fraud again"?

Although, Victoria was told by Wonga that the fraudulent loans

will not affect her credit rating, it has made her

worry about what someone might do with her personal details again.

I thought that, to open an account like this,

they must have had to have a bank account set up in my name...

That could still be out there.

There's a bank account in my name, which I don't know about.

They can go to any type of loan provider and do that again,

it'll happen again. I'll have to go through that.

Fraud expert Andrew Goodwill

believes that it's possible with some payday lenders

that the bank account that the loan is paid into does not

have to be the same as the one that will be used to pay the debt back.

And so, even though you've never received any money, if a fraudster

has used your details, it could be you that's now chased for the loan.

Andrew, how do people like Victoria get caught out as victims of fraud?

It could be something simple like her details be thrown

away in a dustbin and appear in a landfill site.

Somebody collects them up, uses that information, goes online,

finds out all the extra bits that you would need, like date of birth,

then you've got details that you can use to open up accounts like this.

How can you open up an account if the name that you are giving is not

the same as the bank account that you're going to put the money into?

The name really doesn't have any relationship to the bank

account number - it's not something that a bank's going to check.

All they're interested in is the number itself of the account.

So, it could be Joe Bloggs.

At the end of the day, the bank is going to put money into that account.

When someone becomes a victim of fraud,

this can really be disastrous for them, can't it? It can.

No-one is safe from fraud in this country at the moment.

Fraud is so big, it's just enormous.

And I don't think that anybody in this country could honestly

say that they don't know anybody,

or they haven't been a victim of fraud themselves.

This year,

the Office of Fair Trading told the top 50 payday loan companies that

they must have adequate procedures to prevent identity fraud.

They even closed down one payday loan company - MCO Capital,

and fined them half a million pounds,

partly for failing to make sufficient ID checks.

However, some online payday lenders say the right checks

ARE in place to protect people.

But Nadia Mornsey wouldn't agree.

Like Victoria, she fell victim to a fraud exploiting Wonga,

when criminals got hold of her debit card details.

Nadia only discovered this when Wonga took almost £1,000 from her

account to pay off two loans in her name that she knew nothing about.

What was your reaction?

I was pretty upset, to be honest.

Partly because I was just

astounded that it was allowed to happen.

Did they explain how it was that your card details were being

used for someone else to get money in your name?

There was no explanation whatsoever from Wonga.

They just issued a standard statement saying they do take

security measures.

But ultimately,

it seems like they are issuing loans to unscrupulous people and then not

insisting that the same card details be used to pay back the loans.

Nadia's bank refunded the stolen money, but she still wants answers

as to how Wonga could let her card details be used fraudulently.

Wonga insist that their fraud levels

remain well below the industry average.

But I wanted to know exactly what they're doing to tackle this

sort of fraud, and what they say to people like Nadia

and Victoria, who are disappointed with how their problem was handled.

The company didn't want to be interviewed,

but I gave them a call to find out more.

Are you confident that you have in place enough security to

ensure that the public are protected?

Wonga stressed that what's happening here is criminal,

and though they're confident that they're doing all they can to

stop it, fraudsters will always find new ways to beat the system.

They said...

And they work with both industry-leading service providers

and the police...

They also told us that they're...

And while...

they have a dedicated team to ensure...

They accept that these two cases...

But while, in the end, it was Wonga that lost out financially

as a result of this scam, Nadia's experience has left her worried

that a fraudster might make use of her details again.

I've been keeping a really close eye on things now

because my card had been somehow cloned or some criminal has

managed to get hold of the details, so it's entirely possible by the

sounds of it, that it could happen again - to me or to anyone else.

We've hit the road again,

and this year out annual pop-up shop visited Liverpool.

We've been hearing your stories...

If I'm paying £150 for a dress,

I expect it to be worn more than twice.

..solving your problems....

What I've learnt from this experience is never to book

with that company again.

..and giving you top consumer tips.

If you're going to buy a high-cost item, buy it from a reputable

retailer, somebody that you know, that you've got reviews for.

Before calling into the shop to speak to our experts,

many of you took the opportunity to visit our complaints corner,

where you weren't short of things to get off your chest.

What annoys me is cold calls.

Cash machines that charge you for getting your own money out.

I think they should be banned.

What annoys me is really bad customer service.

You don't feel like a valued customer.

When we go into a store and there's a very large queue

and there's only one person serving customers.

And that's it, really.

'Back inside, perhaps one of the saddest stories

'we heard was from Joanne Yude and her mother Betty.

'Angela and financial expert Sarah Penells heard how

'cold callers from a catalogue company somehow persuaded

'Betty, in her late 70s at the time, to take out a loan for £1,500.'

They delivered that by courier.

So she put it in the bank, and it sat there, so she didn't need it.

'But it didn't end there.

'Soon, the same company called her again

'and talked her into taking on another loan for £1,500.'

Four or five months later,

they sent her another cheque for another £1,500.

Can I just ask you, Betty, why did you give into them

when they kept ringing? What made you say yes?

I don't know. I don't know.

I've got a big family and Christmas was coming up.

I just gave in.

'Then things got worse.

'Her bank offered to clear the debt - now at a huge £8,900,

'thanks to crippling interest payments, by also offering a loan.

'But the one they sold her was for a much larger amount than the debt - £12,000.'

She ended up paying more than her outgoings.

So it just doesn't make sense.

It just seems that they found a vulnerable old lady

and ripped her off, basically.

How can they do that?

I have to say, this is one of the worst cases I've seen through

Rip Off Britain.

I would actually complain about both loans.

A lender, whether it's a bank or a catalogue company,

should lend in a, what's called, responsible way.

And this wasn't, because it never makes financial sense to

borrow money you don't need.

And when you say complain, to whom should she be complaining?

The head office of the catalogue company.

Do it in writing, always keep a copy of the letter you send.

Mark it "formal complaint".

Give them both eight weeks to look into your case

and then take it straight to the Financial Ombudsman Service.

I think that they would be very interested in this case,

because I think there have been several regulations that have

been quite blatantly breached here.

'The Financial Ombudsman has the power to return all of Betty's

'money, if appropriate.

'So after hearing Sarah's advice, Joanne is going to keep

'fighting her mum's corner until she gets this resolved.'

Still to come, an alternative to payday lenders.

Does the Church have the answer?

They explain it you.

It's all written down, there's no small print,

it's all there in black and white.

Next, an industry that promises to make things better

but too often seems to do just the opposite.

Debt management companies have sprung up offering to sort out your finances

if you're having trouble keeping up the repayments on any loans.

But things don't always go to plan,

and you've been telling us about one company in particular that's

left some of you in a worse position than when you started.

Angie Proudly was struggling to manage more

than £10,000 worth of debt, when,

out of the blue, a company called One Debt Solution rang offering to help.

They said not only would they be able to arrange affordable monthly

payments, but they could maybe even get some of the debt written off.

They seemed very caring, very understanding, made me

feel really at ease.

I thought, "This is brilliant," you know?

What more could anybody ask for?

Somebody that's going to help me

get out of a horrible situation that I'm in.

The company paperwork said One Debt Solution aims to clear your

debts within five years.

So, in August 2010, Angie signed up to a payment plan,

arranging to pay £135 a month to the company.

And although 15% of this, just over £20 a month,

covered the company's regular admin fees and charges,

Angie felt confident that a large chunk of her monthly payment

would go towards paying off the debt.

I felt really happy that...

..that had been taken out my hands.

Somebody was going to deal with it for me,

and put me back on the right track.

The promises made in paperwork were really clear.

The company would stop any interest

and penalty charges being added to the debt,

pay Angie's creditors every month and send a monthly statement.

But three months into the contract, Angie realised that

One Debt Solution hadn't sent her any statements,

so she called them for an update.

All I wanted, basically, was to get a statement of...

A breakdown of what had been paid to my creditors

and a balance of how things were going.

But Angie got no response.

On top of that, she was still receiving

demands for payments from her creditors, which made her worry that

the money that she was paying One Debt Solution wasn't being passed on.

Angie couldn't understand what was going on.

Ten months after signing up,

she had paid One Debt Solution over £1,300, but she hadn't received a

single statement to prove any of that money had made it to her creditors.

Worse still, one of the creditors was now threatening legal action.

I spent a lot of time crying on friends',

family's shoulders because I just didn't know which way to turn.

Unsure where her payments were going, Angie decided to end the contact,

and in June 2011, requested a full refund.

£135 a month, to me, is a lot of money.

To pay out that money to a company and not have anything done...

Well, words fail me.

They really do.

But the company didn't give her the money back,

so Angie made a formal complaint to the Financial Ombudsman Service.

And when they investigated,

it turned out that of the £1,350 she had paid to One Debt Solution,

just £9.50 had been passed to her creditors -

not even remotely what had been agreed.

The Ombudsman said Angie should be refunded in full, with interest

and compensation.

All the stress that I had from this company put me on a real low ebb.

I just wish I'd never introduced them in my life at the beginning.

When we contacted One Debt Solution, the company told us that it

accepted the Ombudsman's decision, and agrees that...

It added, this case...

..and said it had...

However, Angie says she has not yet had back the full amount.

Sadly, Angie's experience with One Debt Solution is not unique.

We've been contacted by 15 other Rip Off Britain viewers with

similar stories.

Among them, former soldier Nick Idiols from Kent.

He left the army in 2008 to become a full-time father.

Determined to get on top of his mounting debts,

he too turned to One Debt Solution.

I thought, finally, about time, my debts would be cleared,

I can get on with my life.

So I was excited about the prospect of, five years from now, I'm going to be debt free

and working towards my dream of actually owning a house.

In June 2011, Nick started to pay One Debt Solution £100 a month to

manage his debts.

The company was supposed to be paying each creditor a token amount

while they established if any of these debts could be written off.

But Nick had no idea whether they were actually doing it or not.

There was no proof, I had no correspondence...

where my money's going.

When we checked, every one of Nick's creditors told us they hadn't

received any of the payments from One Debt Solution they were supposed to.

But Nick says he had no idea of that

because they were ignoring his requests for information.

Basically, they were just unresponsive.

They weren't telling me what was happening and before I knew it,

I'd paid a whole year's worth of money for nothing.

Just like Angie, Nick kept being chased for money by creditors

he was supposedly paying One Debt Solution to manage.

And with his financial problems getting no better,

resulting in him missing a couple of months' payments, in July 2012,

he decided to close his account and ask for a refund.

Instead, the company offered him £350 of the £880 he'd paid them,

which, thinking it was better than nothing, he accepted.

I understand that I made mistakes when I was younger.

I got these debts, I got myself in this problem, but then I turned

to a company in question that made promises to change that for me.

All I want is to one day get on my feet,

get a mortgage of my own, have a home and provide for my children.

One Debt Solution insists it did send Nick monthly statements and that it

was Nick's failed payments that delayed progress with his account.

The company says by the time he cancelled,

they were negotiating offers of repayment with his creditors.

But...

And the absence of Nick doing so meant it was...

One Debt Solution also told us it can demonstrate....

But Nick would still like all of his money back.

So, he's on his way to the Financial Ombudsman Service to find out

if there's anything more he can do.

Any business has eight weeks to sort out a complaint,

and if it can't sort out your complaint within that time,

then you can automatically come to the Ombudsman

and we can help you sort it out for free.

In 2012, the Ombudsman investigated around 600 complaints

about various debt management companies.

In over half of those cases, they found in favour of the consumer,

so Nick's hoping they can help him resolve his case too.

The Ombudsman can also provide free information to anyone

struggling with debt.

So, chances are you may not even need

the help of a debt management company at all.

Back in Southampton, Angie is also looking for further help.

As One Debt Solution did nothing to sort out her finances,

she's still wrestling with a £10,000 debt.

Thank you for coming today.

She's come to her local Citizens Advice Bureau where she's delighted

to learn that rather than pay a company to manage your finances,

there are several organisations who can try and help for free.

People sometimes panic and look on the internet, and they rush

into a debt management plan, and it might not be the best option.

There is a best way forward

and it might not be the debt management plan.

For Angie, knowing there are other places she can turn to

is very good news indeed.

Just really pleased that, you know, I've got the booklet now

to hopefully be able to get on with my life and get it sorted.

I feel optimistic about the future now.

Details of the organisations who offer free debt advice

are on our website.

..where you'll also find other tips on how to better manage your money.

Now, as you know, the payday loan industry has no shortage of critics,

and in the summer, the Archbishop of Canterbury

joined in as well, with a vow to compete them out of existence.

So what exactly did he mean?

And if you're desperate for a loan, what is the alternative?

Where do you go if you need cash fast and your bank can't help?

Well, it's estimated that over seven and a half million new payday loans

were taken out between 2011 and 2012.

For many, it's a quick solution to their money worries.

But with eye-wateringly high interest rates,

they have recently come under fire from some very high places.

It's an industry that Alison is familiar with.

When she needed money quickly to pay for bills,

she found herself having to borrow from doorstep lenders.

I started using them when my daughter was six months old,

my first child. I moved into my first council property.

I had a maximum of seven days to move in

before I had to start paying them. The banks aren't going to lend you.

Erm... You've got to get it from somewhere.

In the past, probably used them 30-40 times.

But whilst they solved her problems in the short term,

it soon proved tricky for Alison to keep up with

the repayments on all her debts, and the interest on them as well.

It's a hole you get stuck in.

You're going round in circles and you can't pay 'em,

you can't find the money, so the only thing is you think,

"If I leave it, it'll go away," and it doesn't go away.

You just end up paying a lot more back.

But then salvation came from an unexpected source.

Peta Hill runs a sub branch of Lincolnshire Credit Union

from Alison's local church and has seen first hand the pressures

people in the community are facing.

I think one of the real issues is that people don't know where to go.

They don't know what else is available

and a payday loan or a doorstep lender is quick, it's easy access,

and in terms of a crisis, people think, "What can we do quickly?"

We know that people know that they are letting themselves

into that cycle, but we also know from things that people have told us

that they don't know how to get out of that.

Peta soon realised that the community needed other options

to help get them out of debt.

It pulls people into the cycle of debt,

whereas credit union helps people get out of the cycle of debt.

With a doorstep lender, it's very easy to borrow some money,

not to be able to pay off the loan, and then be encouraged to

have another loan to pay off the initial loan.

So, that cycle spirals out of control,

and we have seen that in this community.

This credit union works like many other lenders

in the sense that if you need to borrow money,

they will check you can afford to pay it back,

but where it differs is that the interest rates are very low,

at this branch just 1% a month,

and therefore should be much more manageable.

There are several churches in Lincolnshire that have got involved

with credit union.

We've done extremely well, we've been running for about two years.

We have got investments of £80,000 from the local community,

which shows that the local community wants to support that.

One of the concerns for credit unions generally is that

some of their loans are high-risk loans,

so how can they maintain their sustainability?

How can they keep that up?

One of the things that we try to encourage is people, when

they're paying back their loan, that they will save even a pound a week

or a pound a month, so that when they have a crisis another time,

actually they have a little bit already to help them.

Such low interest rates have been a lifeline for Alison.

I filled the form out and the first ever loan I got off them were £150.

I was so shocked at the interest. A penny to the pound.

They explain it to you.

It's all written down, there's no small print.

It's all there in black and white, whereas a doorstep lender,

they'll say, "Sign there."

The credit union here is one of around 400 across the country,

and there are plans to set up more.

In April this year, the government announced an investment

of £38 million to expand the credit union sector

and help up to one million more people in the process

by giving them access to banking products, debt advice

and affordable loans.

On top of that, the Archbishop of Canterbury has announced that

the Church of England is backing church credit unions

to compete directly with payday lenders.

We think you can probably do it for about an equivalent annual rate

of about 70 or 80%. It's better than 5,500%.

Staff and volunteers back at the Lincolnshire Credit Union

are all too aware of the importance of continuing to offer

an alternative to payday loans for the local community.

We all have the same aim, which is to help people,

particularly in these difficult times when they're faced with benefit cuts,

possibly changes to the way benefits are paid.

Those people, in my experience,

don't necessarily have the skills that they need to actually manage

that budget, and I think that's where we and other organisations

have a role to play.

We just don't want people falling through the cracks.

And we believe that we've got a really big role to play

in the future, but we need the support of the whole community.

Nice to see you this morning. Bye! Thank you.

Sometimes when you feel ripped off,

it could be you that's made a mistake.

Perhaps you didn't read the small print, or realise the consequences

of what you've signed up to.

Whoever's at fault, when things go wrong,

you need to know what to do about it.

So, we've put together an online booklet of tips and advice.

You can find a link to download the free guide on our website...

Or for a hard copy, send a stamped A5 envelope

to the address which we'll give at the end of the programme.

Payday loans have become an increasingly popular way

of accessing cash.

Last year, borrowers took out £2 billion worth of loans,

but do they always know what they're getting into?

They're asking for more interest.

They keep putting money on when I've already paid it.

The interest they charge on these payday loans is astronomical.

A lot of people don't realise and it's an easy fix for people.

Last year, debt charity Step Change reported a 30% increase

in calls from people struggling to deal with debt from payday loans.

So we asked financial expert Michael Ossei

to help unravel the language of the lenders.

These loan companies, short-term loan companies,

are very much like the modern day highway men.

What we have is financial crisis. People need money.

They need instant cash.

And what's happened is that these companies have come in

and are actually offering a service,

but not being totally transparent to the consumer.

And while some payday lenders do follow the rules,

others have been accused of advertising their services

with simple-sounding maths that in fact disguise huge interest rates.

Michael gave us an example.

To start off with

there is the fee. Every £100 you take out, they charge you up to £30.

So imagine you take out £200. It's cost you £60 already.

So at the end of the month, you need to pay £60.

That might not seem too bad

if you can pay back the whole amount on time and walk away.

But miss a payment, and you can quickly find yourself owing

a lot more than the £200 you first borrowed.

If you were to miss your payments by three days,

you're looking now at almost £71 worth of interest

that you now have to pay on top of your loan.

Now that is a lot of money.

And if you can't pay the loan back,

penalty charges can turn your small short-term loan

into a much bigger long-term burden.

I got one. £225.

They wanted £225 back.

Now they're charging me £30 a day to pay it back.

If I borrowed £50, I have to pay 64 back.

Now I'm in debt of over nearly five grand.

And of course missing payments on any loan

can have serious implications for your future.

Every time you take out one of these loans,

it's going to go on your credit file,

and your credit file is going to be with you for life.

So if you do mess up, you wouldn't be able to get a mortgage,

you wouldn't be able to get a standard loan.

If you are thinking of taking out a payday loan,

Michael has some key advice to keep in mind.

If you are ever in a position where you need to get a short-term loan,

look at how much it costs.

A lot of these loan companies will tell you it's £30 for every 100.

Make sure you're aware of that.

Make sure that there are no fees,

find out how much they will charge you if you miss a payment.

And remember, there are alternatives to payday lenders,

such as credit unions, which, as we heard earlier in the programme,

won't charge the same sort of rates.

You can find further details, along with more advice on loans

and borrowing, on our website.

Here at Rip Off Britain we're always keen to hear more of your stories,

and we're particularly interested in ones to do with food

for a new series for next year.

Confused by all those different labels on supermarket shelves?

Worried that products described as healthy may be nothing of the kind?

Whatever's worrying you about the things that we put on our plates,

you can write to us at...

Or you can always send us an e-mail.

The Rip Off team is ready and waiting to investigate your stories.

Now, we're told that the UK economy is slowly on the mend,

but an awful lot of people are still facing very tough times.

And, as we've heard,

while there are plenty of companies who say that they can help you out

either by lending you cash fast or even sorting out your finances,

if you're not careful, some of them can just end up

creating even more problems.

Well, we'll have to wait and see what happens

with some of those payday loan companies.

But any industry that manages to end up with the Office of Fair Trading,

the Archbishop of Canterbury and people like us on its case,

probably does need to sit up and take notice. I'll say!

It certainly is a formidable combination.

But on that point, that's all we've got time for today.

You can always find plenty of financial advice on our website.

And we'll be back very soon to investigate more of your stories.

But until then, thanks for your company, and from all of us,

bye-bye. Bye-bye. Bye.

Subtitles by Red Bee Media Ltd