0:00:02 > 0:00:04We all like to think we're getting a fair deal for our money,
0:00:04 > 0:00:07whether we're buying, selling or taking out a loan.
0:00:07 > 0:00:10And when times are hard it matters even more.
0:00:10 > 0:00:14But many of the deals on offer could cause you real problems.
0:00:14 > 0:00:16Some could even wreck your life.
0:00:21 > 0:00:24ALL CHANT: Say no to payday loans.
0:00:24 > 0:00:27Coming up, the controversy over payday loans -
0:00:27 > 0:00:30we look at easy credit on the high street.
0:00:30 > 0:00:31The man in the Money Shop
0:00:31 > 0:00:36just told me he's never seen a payday loan application be refused.
0:00:36 > 0:00:40How one couple's worst deal turned out to be an illegal fraud
0:00:40 > 0:00:44that left them £40,000 out of pocket.
0:00:44 > 0:00:49It was just...absolutely horrendous, every day was...was a nightmare.
0:00:49 > 0:00:53And how dealing with a loan shark can have violent consequences.
0:00:53 > 0:00:57He beat me about my head and he took the money that I had.
0:01:01 > 0:01:04With the cost of living shooting up, many of us
0:01:04 > 0:01:06are finding it increasingly difficult to make our money
0:01:06 > 0:01:09stretch to the end of each month.
0:01:09 > 0:01:12But in these times of crisis there are companies out there
0:01:12 > 0:01:15promising a great deal - or so they say.
0:01:15 > 0:01:17Wonga.com offers cash loans.
0:01:17 > 0:01:21What's refreshing about wonga.com is that YOU control the loan.
0:01:21 > 0:01:24Payday loans - as they're known - claim to provide
0:01:24 > 0:01:27a speedy solution for life's little cash emergencies.
0:01:27 > 0:01:29You can walk into the shop, or log in online,
0:01:29 > 0:01:33and within minutes the cash you need is in your pocket.
0:01:33 > 0:01:34It's so quick and simple.
0:01:34 > 0:01:37There's nothing to fax and no extra paperwork to send.
0:01:37 > 0:01:40Sounds easy. But with the highest interest rates topping
0:01:40 > 0:01:44an eye-watering 4,000% APR, payday loans have earned
0:01:44 > 0:01:48a reputation for sucking people into a spiral of debt
0:01:48 > 0:01:52and leaving many believing they're the worst deal they ever made.
0:01:52 > 0:01:55You're borrowing just before you've got paid
0:01:55 > 0:01:58so you're already spending next month's wages.
0:01:58 > 0:02:01So if you can't then pay that loan back out of next month's wages
0:02:01 > 0:02:04then you have to start borrowing from the following month's wages
0:02:04 > 0:02:07and it's very easy to get into a spiral of debt where you're just
0:02:07 > 0:02:10taking loan after loan out to pay back the previous month's debt.
0:02:12 > 0:02:16And that is exactly what happened to Richard Merritt from West London.
0:02:16 > 0:02:20Like so many of us, Richard's salary never seemed to go far enough
0:02:20 > 0:02:22and he took a series of payday loans
0:02:22 > 0:02:25and ended up thousands of pounds in debt.
0:02:25 > 0:02:28His first loan was £250
0:02:28 > 0:02:31but he then realised he needed more.
0:02:31 > 0:02:33I had to take out another one
0:02:33 > 0:02:37because I was paying back the interest on the first loan,
0:02:37 > 0:02:43which made me then short of money, erm, to pay me other bills.
0:02:43 > 0:02:47So I took out another one to cover the interest of that one.
0:02:47 > 0:02:49And...so it went on.
0:02:49 > 0:02:53The financial burden of paying off his payday loans
0:02:53 > 0:02:57meant Richard lost his flat and had to move in with his sister.
0:02:57 > 0:03:01It also means he has to cut down his household spending
0:03:01 > 0:03:02to the very minimum.
0:03:02 > 0:03:04Just the basics here.
0:03:04 > 0:03:08My weekly shop I probably get done for about £15.
0:03:10 > 0:03:13Taking a payday loan is becoming more common in the UK.
0:03:13 > 0:03:16John Fairhurst runs a free debt-management company.
0:03:16 > 0:03:20He's worried that borrowers are getting hooked on a monthly loan to tide them over,
0:03:20 > 0:03:23without realising the consequences.
0:03:23 > 0:03:26The rates of interest are many hundreds of per cent,
0:03:26 > 0:03:29which is very high if you're using these things on a regular basis.
0:03:29 > 0:03:31On a one-off basis people may consider it's a small price to pay
0:03:31 > 0:03:34for an easy process, but what we're seeing is people who
0:03:34 > 0:03:38take out multiple payday loans repeatedly, and the cost of that is extortionate.
0:03:38 > 0:03:43Over two years Richard took out ten payday loans.
0:03:43 > 0:03:46As bills came in he found he needed to go online
0:03:46 > 0:03:50and apply for a loan just to stay financially afloat.
0:03:50 > 0:03:53He took out multiple payday loans from different companies
0:03:53 > 0:03:55all at once.
0:03:55 > 0:04:01At one point, the high interest on his loans meant he had to pay £1,000 in one month
0:04:01 > 0:04:05and the payday loan companies were chasing him for payment.
0:04:05 > 0:04:07They threatened to ring me at work,
0:04:07 > 0:04:09which was sort of a bit embarrassing.
0:04:09 > 0:04:15You tell them to stop ringing you at work but they're still persistently doing it.
0:04:15 > 0:04:16Put me under a lot of stress.
0:04:16 > 0:04:21Richard turned to a free debt management service for help.
0:04:21 > 0:04:24I got in contact with them, explained my situation,
0:04:24 > 0:04:26and they were very sympathetic.
0:04:26 > 0:04:31Went through my debts with me and found out exactly how much I owed,
0:04:31 > 0:04:36which at the time was over £5,000, which was quite frightening.
0:04:36 > 0:04:41Richard borrowed from around ten different companies.
0:04:41 > 0:04:43At the point he hit real financial difficulties,
0:04:43 > 0:04:47he owed between £1,500 and £2,000.
0:04:47 > 0:04:48In a few months,
0:04:48 > 0:04:50that went up to that figure of £5,000
0:04:50 > 0:04:55because of the high interest rates and charges for the payments he missed.
0:04:55 > 0:04:58The debt-management company supported Richard
0:04:58 > 0:05:03and negotiated with the payday loan companies a monthly payment of 100,
0:05:03 > 0:05:04which Richard can afford.
0:05:04 > 0:05:07He no longer uses payday loans.
0:05:07 > 0:05:10It would be hard to find credit more expensive than a payday loan.
0:05:10 > 0:05:13If you have alternative sources of credit and you need a loan,
0:05:13 > 0:05:14then you should look there first.
0:05:14 > 0:05:19What payday loan companies should be doing is making sure they understand their customer.
0:05:19 > 0:05:23As soon as they walk into the door or come onto the website they carry out a thorough fact-find,
0:05:23 > 0:05:28they understand what other debts they've got and in some cases they turn them away.
0:05:28 > 0:05:32I definitely wouldn't recommend anybody take out a payday loan.
0:05:32 > 0:05:35It was the worst thing I ever did.
0:05:35 > 0:05:39Coming up, we visit payday loan shops on the high street
0:05:39 > 0:05:42and see what people can expect if they're tempted to apply.
0:05:42 > 0:05:48The man in the Money Shop just told me that he's never seen a payday loan application be refused.
0:05:52 > 0:05:57When you apply for a loan, the deal might involve an arrangement fee.
0:05:57 > 0:05:58It's perfectly legal.
0:05:58 > 0:06:03But some illegal companies are taking advantage of this practice,
0:06:03 > 0:06:07demanding upfront fees to arrange loans that never arrive.
0:06:07 > 0:06:10That's what happened to Colin and Julie Stoneley from Surrey.
0:06:10 > 0:06:14Since 2003 they've run a llama trekking company
0:06:14 > 0:06:17out of their rented cottage in Guildford.
0:06:17 > 0:06:19But when a local pub came up for sale,
0:06:19 > 0:06:24they thought it would be the perfect opportunity to expand the business.
0:06:24 > 0:06:28Instead it turned out to be their worst deal.
0:06:28 > 0:06:32Part of the financing involved mortgaging our house in Spain.
0:06:32 > 0:06:40So we tried various Spanish banks - remortgaging in Spain is almost unheard of -
0:06:40 > 0:06:45and eventually found an ad which was running in the Times
0:06:45 > 0:06:49and the Telegraph week after week
0:06:49 > 0:06:51for a company called Gresham Finance.
0:06:51 > 0:06:54The company had plush offices in central London
0:06:54 > 0:06:59and was headed by entrepreneur Edward Davenport.
0:06:59 > 0:07:00Colin and Julie were impressed,
0:07:00 > 0:07:04and after a meeting with Davenport's second-in-command, Peter Riley,
0:07:04 > 0:07:09they decided to borrow the extra £300,000 they needed to buy the pub.
0:07:09 > 0:07:17There was an upfront fee, as I remember, of 3,500 to start with.
0:07:17 > 0:07:22Then we paid a similar fee for something else, and we then funded
0:07:22 > 0:07:28various things, the surveyor's trip to Spain and other bits and pieces.
0:07:28 > 0:07:32You know, so...the total was about £14,000.
0:07:32 > 0:07:36With the agreement in place and the loan on its way,
0:07:36 > 0:07:40the Stoneleys handed in their notice on the cottage
0:07:40 > 0:07:43and packed up all their belongings ready for the move.
0:07:43 > 0:07:46But on the day of completion, the money didn't arrive.
0:07:46 > 0:07:49We obviously were very, very concerned about this,
0:07:49 > 0:07:55we phoned and said, "What's happening?" because we had our whole home packed up in a van,
0:07:55 > 0:07:59the people selling the pub had all their belongings packed up
0:07:59 > 0:08:03and obviously the people they were buying from were in the same position.
0:08:03 > 0:08:08Colin and Julie rang Peter Riley, the man they'd been dealing with at Gresham Finance,
0:08:08 > 0:08:11who told them that there'd been a hitch with the money,
0:08:11 > 0:08:14but it would be in their account in a couple of days.
0:08:14 > 0:08:17At that time I think we actually believed there'd been a hitch
0:08:17 > 0:08:24so at that point I don't think we felt...in danger, if you like, of anything,
0:08:24 > 0:08:26we were just a bit concerned, bit shocked.
0:08:26 > 0:08:29And the money was going to be there on Monday.
0:08:29 > 0:08:33The Stoneleys arranged to stay at a friend's house for the weekend.
0:08:33 > 0:08:37But when Monday arrived, the promised money didn't.
0:08:37 > 0:08:39We were told the money would be there on Friday,
0:08:39 > 0:08:43and then we were told the money would be there the next Friday,
0:08:43 > 0:08:47and this situation continued...
0:08:47 > 0:08:51well, it continued for three months basically,
0:08:51 > 0:08:55by which time we'd moved all our belongings into a shipping container,
0:08:55 > 0:08:58the landlord of the pub was back here running the pub,
0:08:58 > 0:09:02all the other people in the chain hadn't been able to move,
0:09:02 > 0:09:05and it was just a disaster, wasn't it, really?
0:09:05 > 0:09:08Emotionally, I think...
0:09:12 > 0:09:17..just...our whole life was just so difficult during that period.
0:09:17 > 0:09:19It was awful.
0:09:19 > 0:09:24It was only because of support from friends and family that we got through it.
0:09:25 > 0:09:31To make matters worse, the other people in the chain started chasing Colin and Julie for money,
0:09:31 > 0:09:36demanding that they pay all the extra expenses caused by the delay.
0:09:36 > 0:09:39The sort of things you're liable for. This is further up the chain.
0:09:39 > 0:09:42Lost holiday due to uncertainly of situation.
0:09:42 > 0:09:45Two lots of removals.
0:09:45 > 0:09:46Litigation costs.
0:09:48 > 0:09:49Council tax for rental property.
0:09:49 > 0:09:54- Failure to complete at the right time.- That was £10,000.
0:09:54 > 0:09:58The other finance thing we had to put in place for Spain, 6,500, and so on.
0:09:58 > 0:10:02- Interest for failing to complete. - Was another £10,000.
0:10:03 > 0:10:07The Stoneleys ended up having to pay almost £40,000 extra
0:10:07 > 0:10:12to cover fees and expenses for the other people in the chain.
0:10:12 > 0:10:18And to make matters worse they were still living in their friend's spare room with their lives on hold.
0:10:18 > 0:10:26I don't know how we got through it, to be honest, it was just absolutely horrendous, every day was a nightmare
0:10:26 > 0:10:31because you didn't know what was going to happen -
0:10:31 > 0:10:36we were facing total financial ruin, erm...
0:10:36 > 0:10:41or we were going to get the money that day and move in and everything would be all right.
0:10:41 > 0:10:43And, um...
0:10:49 > 0:10:51Yeah, it was quite tough.
0:10:51 > 0:10:55By this stage Colin and Julie were starting to get suspicious
0:10:55 > 0:10:58and decided to pay Gresham a visit.
0:10:58 > 0:11:01Well, we went up to Portland Place, where their office was,
0:11:01 > 0:11:10and we sat in the foyer all afternoon and we called Peter a few times
0:11:10 > 0:11:14and he said he was on his mobile, he was out of the office.
0:11:14 > 0:11:19At about 4:10 we rang him again on his mobile and started to climb the stairs.
0:11:19 > 0:11:22And he said, "I'm still not in the office,"
0:11:22 > 0:11:25and by this time we could actually hear his voice through the door.
0:11:25 > 0:11:27We pushed the door of his office open
0:11:27 > 0:11:34and said, as we faced him on the mobile to us, "Didn't think you were in the office, Peter."
0:11:34 > 0:11:36But even though they'd just caught him in a lie,
0:11:36 > 0:11:42once again Peter Riley managed to convince the Stoneleys that the money was on its way
0:11:42 > 0:11:47and that if they could just wait a few more days everything would be resolved.
0:11:47 > 0:11:54By this stage I think... Did we smell a rat? We weren't happy but it still seemed very plausible.
0:11:54 > 0:11:57He was extremely plausible as a conman.
0:11:57 > 0:11:59The penny finally dropped
0:11:59 > 0:12:02when Colin saw an article in Private Eye magazine
0:12:02 > 0:12:05linking Edward Davenport and the Portland Place offices
0:12:05 > 0:12:07to a suspected loan fraud.
0:12:07 > 0:12:13And that night I wrote a letter which said, "We've been promised this..."
0:12:13 > 0:12:16and I listed the various promises, and I said,
0:12:16 > 0:12:22"Unless you return our costs in full,
0:12:22 > 0:12:27"or supply the money by Friday,
0:12:27 > 0:12:34"I will go to the FSA and the police."
0:12:34 > 0:12:39And by return of post we had a cheque for £14,000.
0:12:43 > 0:12:45Which...
0:12:46 > 0:12:50..I think we were very lucky.
0:12:50 > 0:12:53Even though they got their Advance Fee back, Colin and Julie
0:12:53 > 0:12:58were still nearly £40,000 out of pocket thanks to Gresham Finance.
0:12:58 > 0:13:02And it wasn't long before the company caught the eye of the Serious Fraud Office.
0:13:02 > 0:13:06When we started investigating Gresham we found their own records showed
0:13:06 > 0:13:11that between about 2007 and 2009 there'd been up to 100 victims
0:13:11 > 0:13:18and they had lost between them up to about £4 million in just the advance fees.
0:13:18 > 0:13:24But it's not just businesspeople borrowing thousands who can fall prey to this kind of trap.
0:13:24 > 0:13:27Fraudsters will target anyone who is desperate for money,
0:13:27 > 0:13:31offering loans in return for a so-called arrangement fee,
0:13:31 > 0:13:35typically between £50 and £100.
0:13:35 > 0:13:38But once the fee's been paid, the loan never arrives.
0:13:38 > 0:13:42In fact, last year over 3,000 people complained to
0:13:42 > 0:13:47the Office of Fair Trading after getting involved with a loan scam -
0:13:47 > 0:13:51that's an increase of 50% from the year before.
0:13:51 > 0:13:55In the time of a recession this is an ideal opportunity for fraudsters to prey on victims.
0:13:55 > 0:13:58It's important to understand what you're supposed to get for your money.
0:13:58 > 0:14:01If you're borrowing from one of the high street banks
0:14:01 > 0:14:06you can be confident that if they say there's an upfront fee then that's a legitimate charge.
0:14:06 > 0:14:11But if you are in any doubt whatsoever, I would say don't pay anyone any money, be very careful,
0:14:11 > 0:14:13and know the person that you're trying to borrow from.
0:14:13 > 0:14:16Edward Davenport and Peter Riley
0:14:16 > 0:14:19were each jailed for seven years and eight months.
0:14:19 > 0:14:23It kind of gave us the justice we wanted,
0:14:23 > 0:14:27the proof that actually we weren't bad people...
0:14:28 > 0:14:33You know, because it did make us feel...like we were really bad people
0:14:33 > 0:14:38because of all the other people's lives that were affected.
0:14:38 > 0:14:42Colin and Julie eventually managed to get the funding together
0:14:42 > 0:14:45to buy the pub, although they'll never get back
0:14:45 > 0:14:48the £40,000 they had to pay out for the delay.
0:14:48 > 0:14:54It was a horrendous experience that dragged on and on for months,
0:14:54 > 0:14:59taxing on our health and horrible for everyone, emotionally,
0:14:59 > 0:15:02financially, everything. And...
0:15:03 > 0:15:09..I'm just really pleased that the people involved are behind bars for a few years.
0:15:16 > 0:15:21One of the worst deals anyone could ever make is to get involved with a loan shark.
0:15:21 > 0:15:23That's what happened to Andrew.
0:15:23 > 0:15:27That's not his real name and we've also disguised his voice.
0:15:27 > 0:15:30He borrowed £1,000 from a mysterious friend of a friend.
0:15:30 > 0:15:36It's absolutely totally wrecked my life. Shattered.
0:15:36 > 0:15:38To a million pieces.
0:15:38 > 0:15:43Andrew's problems started when his car broke down.
0:15:43 > 0:15:47With no way of getting to work, he needed cash to fix it, fast.
0:15:47 > 0:15:52But, with a large loan already in place and a poor credit rating,
0:15:52 > 0:15:55Andrew knew he couldn't borrow from the bank.
0:15:55 > 0:15:58A friend introduced him to a man who could help.
0:15:58 > 0:16:05I was very impressed. The gentleman was smartly dressed, he was extremely friendly,
0:16:05 > 0:16:08he sympathised with my situation
0:16:08 > 0:16:11and I thought what a...
0:16:13 > 0:16:16I thought what a really nice guy he was.
0:16:16 > 0:16:19Andrew borrowed £1,000,
0:16:19 > 0:16:25and agreed to pay back £2,000 in instalments of £150 a week.
0:16:25 > 0:16:28He was told, if he missed a payment, that was OK,
0:16:28 > 0:16:31it would just double up the following week.
0:16:31 > 0:16:38As far as I was concerned what it meant was that, if I didn't pay him the 150 quid on that particular week,
0:16:38 > 0:16:43he would accept a higher payment the following week.
0:16:43 > 0:16:47The man told Andrew that each week he should expect a call from a withheld number.
0:16:47 > 0:16:51The caller would give him a codename and tell him
0:16:51 > 0:16:53when and where to bring the repayment.
0:16:53 > 0:16:58I knew it was not 100% legitimate but I couldn't do anything else,
0:16:58 > 0:17:01and it was only because I wanted to go to work that I took it,
0:17:01 > 0:17:03and I thought, well, "You'll be OK."
0:17:03 > 0:17:08The first couple of weeks Andrew managed to make the repayments,
0:17:08 > 0:17:12but in the third week his rent was due and he didn't have enough spare cash.
0:17:12 > 0:17:14He went to the meeting place
0:17:14 > 0:17:17and told the man he didn't have the money that time.
0:17:17 > 0:17:22He said, "No, no, it doesn't work like that." He said, "You can't not pay me.'
0:17:22 > 0:17:27And he just grabbed me by the throat and started assaulting me.
0:17:27 > 0:17:33He said, "You're going to have to learn, when I tell you you pay me, you pay me."
0:17:33 > 0:17:40And, er, my immediate thought was fear, terrible fear.
0:17:40 > 0:17:46He beat me about my head and, er, he took the money that I had.
0:17:46 > 0:17:48And he went to his car and drove off.
0:17:48 > 0:17:52Andrew was desperate to repay the loan as fast as possible,
0:17:52 > 0:17:55and decided to get hold of the money he needed
0:17:55 > 0:17:59by taking out a log-book loan against the value of his car.
0:17:59 > 0:18:04I thought it's better to owe those people than to owe the guy who had attacked me.
0:18:04 > 0:18:09I needed to get him out of my head because it was... it was making me a nervous wreck.
0:18:09 > 0:18:11So Andrew took a log-book loan
0:18:11 > 0:18:15and told the man he was going to pay off the debt in full.
0:18:15 > 0:18:18But he didn't expect what was about to happen.
0:18:21 > 0:18:26Still to come, we'll hear how Andrew was forced to flee his home
0:18:26 > 0:18:29after the loan sharks turned really nasty.
0:18:29 > 0:18:33They pulled me out of the car onto the floor and they started kicking me.
0:18:33 > 0:18:38And how bank charges nearly caused this pensioner to lose his house.
0:18:38 > 0:18:43And I can't tell you what that was like. It felt dreadful. Sorry.
0:18:47 > 0:18:51The payday-loan business is booming.
0:18:51 > 0:18:56In the last three years, the amount of money borrowed more than doubled
0:18:56 > 0:18:59from 900 million to two billion.
0:18:59 > 0:19:03Vacant high-street shops are filling up with lenders -
0:19:03 > 0:19:06in a single year the Money Shop opened 80 new branches.
0:19:06 > 0:19:10We sent a researcher, Alice, down the high street
0:19:10 > 0:19:14to find out what people are told when they ask about a loan.
0:19:14 > 0:19:16This is a fairly ordinary South London high street,
0:19:16 > 0:19:18it's not a particularly wealthy area,
0:19:18 > 0:19:22and there's lots of different shops targeting the kind of people who would use payday loans.
0:19:22 > 0:19:28I'm going to ask to borrow £200, saying that I'm on a part-time salary and uncertain income.
0:19:28 > 0:19:32And if they ask I'm going to say I had problems with debt in the past.
0:19:32 > 0:19:35Alice didn't formerly apply for any loans
0:19:35 > 0:19:38and didn't complete any of the paperwork required by the lenders.
0:19:38 > 0:19:42However, she got an idea of what they might be willing to offer.
0:19:42 > 0:19:45The first shop Alice visited was Speedy Cash.
0:19:45 > 0:19:49Typically a £200 loan for 30 days from here
0:19:49 > 0:19:52will cost £50 in interest and fees.
0:19:52 > 0:19:55I've just been in and they didn't really ask any questions,
0:19:55 > 0:19:59they seemed very ready to give me whatever money I wanted.
0:19:59 > 0:20:00Speedy Cash told Alice,
0:20:00 > 0:20:07if she couldn't pay back the entire loan come payday, she could just pay back the £50 interest
0:20:07 > 0:20:10and roll the original debt over to the next month.
0:20:10 > 0:20:15On that they'd charge me another £50 so then I'd owe £100 for my £200 credit.
0:20:15 > 0:20:20They said I could do this up to four times, by which time you're paying back double what you've borrowed.
0:20:20 > 0:20:25The second shop was pawnbroker Albemarle Bond.
0:20:25 > 0:20:30They charge a lower fee of £28 to borrow £200 for 30 days.
0:20:30 > 0:20:34I needed to show that I was earning £700, but only last month.
0:20:34 > 0:20:37I didn't need to prove that I had a regular income of £700.
0:20:37 > 0:20:43And they offered to lend me £300 the first time and then £700 the following time,
0:20:43 > 0:20:46even though she knew that that was my entire monthly income.
0:20:46 > 0:20:51Next on the high street is another pawnbroker, H&T.
0:20:51 > 0:20:56They were the cheapest, charging £26 to borrow £200 for 30 days.
0:20:56 > 0:20:59They said that they don't really do credit checks as such.
0:20:59 > 0:21:04They'll have a little look at your bank statement but that's as far as their credit check goes,
0:21:04 > 0:21:09so there wasn't that much of an effort to make sure that I could theoretically repay.
0:21:09 > 0:21:14The next shop is the Money Shop, the UK's largest chain
0:21:14 > 0:21:19of high-street cash lenders, with over 420 stores nationwide.
0:21:19 > 0:21:24The man in the Money Shop just told me that he's never seen a payday loan application be refused,
0:21:24 > 0:21:29no matter how bad the credit check was, which might explain why they're so popular.
0:21:29 > 0:21:34The Money shop wanted to charge £50 interest on a £200 loan,
0:21:34 > 0:21:38which works out to over 1,400% APR.
0:21:39 > 0:21:42Together with Speedy Cash, that makes the Money Shop
0:21:42 > 0:21:46the joint most expensive place Alice visited,
0:21:46 > 0:21:53and 73 times more expensive than the average credit-card APR of around 19%.
0:21:53 > 0:21:58You're allowed to roll over...he said a few times, he didn't really give a specific limit.
0:21:58 > 0:22:01They seemed fine with you borrowing large amounts of money.
0:22:01 > 0:22:04To be honest, the thing that I found the most shocking was that
0:22:04 > 0:22:08they've never turned anyone down for credit, cos that really does imply
0:22:08 > 0:22:12that they're not looking very hard at whether people can repay the amounts or not.
0:22:14 > 0:22:18We asked the companies to comment. Albemarle Bond told us...
0:22:37 > 0:22:39The Money Shop told us...
0:22:58 > 0:23:02Speedy Cash and H&T did not respond.
0:23:02 > 0:23:05Ultimately payday-loan companies are working in the interests
0:23:05 > 0:23:08of their shareholders. They want to make as much money as possible
0:23:08 > 0:23:12and the best way to do that is to get people to continue taking out more credit each month.
0:23:12 > 0:23:15Unfortunately that's not what is in the best interest of the customers.
0:23:15 > 0:23:19The rise of the industry has led to a sharp increase in people
0:23:19 > 0:23:24seeking professional debt advice after taking out payday loans.
0:23:24 > 0:23:28In fact, in a recent survey almost half the payday-loan users questioned
0:23:28 > 0:23:33said they thought it had actually made their financial situation worse.
0:23:33 > 0:23:37At one branch of the Citizens Advice Bureau they've been so swamped
0:23:37 > 0:23:41they've started a campaign to get the industry shut down.
0:23:41 > 0:23:45I think it's about time that we show the payday-loan lenders in Medway
0:23:45 > 0:23:50that we mean business, and we have to do something about the situation,
0:23:50 > 0:23:53with over £2.5 million of debt coming through this building each week.
0:23:53 > 0:23:57Today staff from Medway CAB are demonstrating
0:23:57 > 0:24:00outside their local Money Shop.
0:24:00 > 0:24:05ALL CHANT: Say no to payday loans. Say no to payday loans.
0:24:05 > 0:24:08It's generated quite a lot of media attention.
0:24:08 > 0:24:13How does this shop and others like it contribute to the problem?
0:24:13 > 0:24:17I think it's clear, with the likes of Money Shop, if they've got four stores in Medway alone,
0:24:17 > 0:24:19they don't open a store if it's not going to make any money.
0:24:19 > 0:24:23This is the tip of the iceberg. There's more and more on television,
0:24:23 > 0:24:27Wonga and all the other companies, that are charging up to 4,000%.
0:24:27 > 0:24:30People don't read the print, and that's what we're doing today.
0:24:30 > 0:24:35Once you sign the contract you're chained into it, tied up into it, and there's no getting out.
0:24:35 > 0:24:39Concerns about payday loans have become so great
0:24:39 > 0:24:43that they've been banned or interest rates capped in 15 US states
0:24:43 > 0:24:47as well as parts of Australia and Canada.
0:24:47 > 0:24:52But consumer group Which doesn't want to see payday loans outlawed in this country.
0:24:52 > 0:24:54The reality is that there are people
0:24:54 > 0:24:57that are going to want credit
0:24:57 > 0:24:59and if we don't have a regulated industry
0:24:59 > 0:25:05then we're going to have a black market where it's illegal loan sharks dealing with these people
0:25:05 > 0:25:06and that's what we don't want.
0:25:11 > 0:25:14Coming up later, alongside the rise on the high street,
0:25:14 > 0:25:18payday lending is also exploding on the internet.
0:25:18 > 0:25:22We'll see what happens when you go online to borrow cash.
0:25:22 > 0:25:25You can get into a lot of trouble without anybody knowing about it.
0:25:30 > 0:25:33Andrew borrowed £1,000 from a loan shark.
0:25:33 > 0:25:36After the man assaulted him for missing a repayment,
0:25:36 > 0:25:39Andrew raised the money to pay the man off.
0:25:39 > 0:25:41But when he tried to hand over the cash,
0:25:41 > 0:25:46he discovered he was in far deeper trouble than he could possibly have imagined.
0:25:46 > 0:25:52We arranged to meet on an industrial estate where it was dark.
0:25:52 > 0:25:56And he pulled up alongside and got in my car and I gave him the £1,400.
0:25:56 > 0:26:01"Well done, good, good, good. So £150 next week, then."
0:26:01 > 0:26:06I said, "Well, £150 is not due next week."
0:26:06 > 0:26:08I said, "You've had double, which is what you asked for."
0:26:08 > 0:26:13And he said, "No, no, no. I've told you, it doubles up.
0:26:13 > 0:26:16"You owe me £4,000."
0:26:16 > 0:26:21Where Andrew had thought it was just the repayment amount that would double if he missed a week,
0:26:21 > 0:26:24it turned out that it was actually the entire loan.
0:26:24 > 0:26:27A couple of guys got out the car and came over.
0:26:27 > 0:26:32They pulled me out of the car, onto the floor, and they started kicking me.
0:26:32 > 0:26:36They kicked and kicked and kicked.
0:26:36 > 0:26:39I didn't know whether I was going to get out of that.
0:26:39 > 0:26:42Because they didn't stop kicking.
0:26:42 > 0:26:47I knew that I'd been hurt and I thought, "I hope I can go to work."
0:26:47 > 0:26:49HE BREATHES DEEPLY
0:26:52 > 0:26:55Andrew suffered severe bruising and cracked ribs,
0:26:55 > 0:26:59but he was too scared to report the attack to the police.
0:27:00 > 0:27:03And the intimidation didn't end there.
0:27:03 > 0:27:06I come out one morning and all four tyres had been slashed,
0:27:06 > 0:27:09and there was a beer mat under the wiper blade
0:27:09 > 0:27:15with the words "you will pay" scratched into the beer mat.
0:27:15 > 0:27:20And I thought, just get away from the house. So I fled.
0:27:21 > 0:27:24A friend helped Andrew replace his tyres
0:27:24 > 0:27:27and he decided to go and live in his car.
0:27:27 > 0:27:33I slept in the car, ate in the car, my free time was spent in the car.
0:27:35 > 0:27:39Eventually, in desperation, Andrew plucked up the courage
0:27:39 > 0:27:42to confide in a friend, who agreed to give him a place to stay.
0:27:44 > 0:27:46He changed his phone number and his car
0:27:46 > 0:27:49and hasn't heard from the loan shark since.
0:27:50 > 0:27:52But he still lives in fear of being found.
0:27:52 > 0:27:57I'm afraid to go out, I still feel very threatened.
0:27:57 > 0:28:02You become afraid to visit family or return home
0:28:02 > 0:28:04because you never know who's watching.
0:28:04 > 0:28:09Andrew still feels the long-term effects of his experience.
0:28:09 > 0:28:15I did visit the doctor on one occasion and I said, "I think I'm having a nervous breakdown"
0:28:15 > 0:28:21and he said, "You're not HAVING." He said, "You've HAD a nervous breakdown."
0:28:25 > 0:28:28And...
0:28:28 > 0:28:33you still feel it. I still feel it now and it's years later.
0:28:33 > 0:28:36Lending me £1,000 didn't do me a favour at all.
0:28:42 > 0:28:44Most of us might think that the bank is the place to go
0:28:44 > 0:28:47for a solution to a financial problem.
0:28:47 > 0:28:53But what do you do when it's your bank that caused the problem in the first place?
0:28:53 > 0:28:56It's a question that's facing Howard Rutherford.
0:28:56 > 0:29:00For the last five years he's been struggling with an appalling deal
0:29:00 > 0:29:02that's seen him fending off bailiffs,
0:29:02 > 0:29:07standing up in court and even having to sell his home.
0:29:07 > 0:29:09And the source of his worst deal?
0:29:09 > 0:29:11His bank, HSBC.
0:29:13 > 0:29:16I feel cheated, I feel misled,
0:29:16 > 0:29:23I just feel very, very let down by a bank that I'd been with since I was 17.
0:29:24 > 0:29:29The problems started back in 2001, when a direct debit of £76
0:29:29 > 0:29:33was taken from Howard's account to pay his council tax.
0:29:33 > 0:29:38At the time, he had an overdraft, but as a disabled pensioner on a low income
0:29:38 > 0:29:42money was tight and he was already up to the limit.
0:29:42 > 0:29:45That direct debit was returned by the bank,
0:29:45 > 0:29:48and for returning it it did two things, it put me
0:29:48 > 0:29:53over my overdraft limit and the bank charged me £27.50 for the privilege.
0:29:53 > 0:29:59£27.50 was the beginning of a growing stack of charges
0:29:59 > 0:30:04that mounted to over £4,500 and almost cost him his home.
0:30:04 > 0:30:08My pension was going into the bank, and there'd be a charge perhaps
0:30:08 > 0:30:11because I'd gone over my overdraft limit.
0:30:11 > 0:30:16And, as soon as my pension went in, the bank were taking a chunk of that out. So I was having less to use.
0:30:16 > 0:30:21Then perhaps the next month there'd be another charge, and another chunk taken out by the bank.
0:30:21 > 0:30:25As his finances became more strained,
0:30:25 > 0:30:29Howard started falling behind on his mortgage payments,
0:30:29 > 0:30:33which were paid by direct debit through his HSBC account.
0:30:33 > 0:30:37The bank would simply return the direct debit without telling me that it had happened.
0:30:37 > 0:30:42And the building society would also then decide they were going to charge me a fee.
0:30:43 > 0:30:48Howard's mortgage debt grew to nearly £10,000 in arrears and charges
0:30:48 > 0:30:52and the building society began repossession proceedings.
0:30:52 > 0:30:58We did get to the stage finally where the order for possession had been granted
0:30:58 > 0:31:05and the bailiffs were then instructed to apply for immediate possession.
0:31:05 > 0:31:09I managed to get the hearing in front of the judge the morning of the possession.
0:31:09 > 0:31:12I can't tell you how I felt that particular day
0:31:12 > 0:31:16because I was just literally... about for someone to come along
0:31:16 > 0:31:21and say, "I'll take your keys, thank you very much," and throw me out the door.
0:31:21 > 0:31:27At the 11th hour Howard managed to get the possession order rejected.
0:31:27 > 0:31:34I came within a gnat's whisker of someone coming along
0:31:34 > 0:31:37and taking the keys off me and saying, "That's it, you're out."
0:31:37 > 0:31:43And I can't tell you what that was like. It felt dreadful. Sorry.
0:31:43 > 0:31:45It did.
0:31:45 > 0:31:47Still does. Excuse me.
0:31:49 > 0:31:53Struggling to make ends meet, Howard looked around for a solution,
0:31:53 > 0:31:55and found one.
0:31:55 > 0:31:56Or so he thought.
0:31:56 > 0:32:00I'd seen in the newspapers and on the television that people were
0:32:00 > 0:32:06reclaiming their bank charges and I thought, "Well, I've had quite a few bank charges over the years,
0:32:06 > 0:32:08"I think I'll have a go as well."
0:32:09 > 0:32:14Bank charges - where the bank adds on a fee for going overdrawn or for a missed payment -
0:32:14 > 0:32:16have been around for years.
0:32:16 > 0:32:20Estimates from a few years ago suggested banks were making as much
0:32:20 > 0:32:25as £4.7 billion a year from fees of up to £39 for a bounced cheque.
0:32:27 > 0:32:32But in 2006 a campaign began to get these charges reduced or refunded
0:32:32 > 0:32:35on the grounds that they were unfair.
0:32:35 > 0:32:40Customers who threatened court action started to win back hundreds of pounds.
0:32:40 > 0:32:45The banks were too afraid to test the cases in court in case they lost.
0:32:45 > 0:32:48They just paid out to anyone who complained.
0:32:48 > 0:32:56In the first half of 2007 alone, the banks repaid £200m in charges.
0:32:56 > 0:33:00I got hold of my bank statements, a huge pile of them,
0:33:00 > 0:33:05six years, as you can probably imagine, went through them piece by piece
0:33:05 > 0:33:09and built up a picture of how much I'd been charged over those six years.
0:33:09 > 0:33:15What Howard discovered was that he'd been charged a massive 89 times,
0:33:15 > 0:33:21amounting to over £4,500 in charges and interest on the charges.
0:33:21 > 0:33:28There were charges for returned direct debits, there were charges for returned cheques,
0:33:28 > 0:33:32there were charges for returned standing orders,
0:33:32 > 0:33:35there were interest charges of course, which were added to those,
0:33:35 > 0:33:40and when I looked at all of this I was absolutely horrified.
0:33:40 > 0:33:43Howard filed his claim, hoping for a quick resolution.
0:33:43 > 0:33:48When that didn't happen he turned to solicitor Tom Brennan for help.
0:33:48 > 0:33:52- Hello, Tom.- Hello, Howard.- Come in.
0:33:52 > 0:33:55'My initial reaction was that it's a desperate situation'
0:33:55 > 0:33:59for a person who has no control over their money because so much of it is being taken away.
0:33:59 > 0:34:02- Have a seat.- Thanks.
0:34:03 > 0:34:05Now, which document is this?
0:34:05 > 0:34:11What I've done is I've sat down and made a breakdown of how the charges were actually applied.
0:34:11 > 0:34:15These three fees, which amount to £260...
0:34:15 > 0:34:17Those are all on the same day, aren't they?
0:34:17 > 0:34:21But then you start to look at the whole month itself and go back,
0:34:21 > 0:34:26and prior to that there was £180 on top of £260,
0:34:26 > 0:34:29so I was probably saying goodbye to half of my income.
0:34:29 > 0:34:32- So half of your money's disappearing just on this.- Just in charges.
0:34:32 > 0:34:36Tom took Howard's case to the small claims court
0:34:36 > 0:34:41to try to get his £4,500 back from HSBC.
0:34:41 > 0:34:44But before they could get a result, everything changed.
0:34:45 > 0:34:48The Office of Fair Trading decided to take the banks to court
0:34:48 > 0:34:52in a test case to see if the charges were fair.
0:34:52 > 0:34:56In the small claims court the judge put a stay on Howard's case
0:34:56 > 0:34:59while the issue was decided.
0:34:59 > 0:35:02'What that meant for Howard is that he had no way of getting his money back'
0:35:02 > 0:35:07and this case between the OFT and the banks dragged on for two years. And so Howard was trapped in limbo.
0:35:09 > 0:35:14The legal controversy over bank charges came to an end in 2009.
0:35:14 > 0:35:18The courts decided bank charges could not be judged unfair on their own
0:35:18 > 0:35:23because they were part of an overall package of services provided by the banks.
0:35:23 > 0:35:29We think bank charges are grossly unfair because the poorest or those who make mistakes pay the most.
0:35:29 > 0:35:32The second reason is the cost to the banks for providing this money
0:35:32 > 0:35:35is a fraction of what they charge consumers at the end of the day.
0:35:35 > 0:35:39After the ruling the banks did bow to the pressure
0:35:39 > 0:35:42and reduced their headline charges.
0:35:42 > 0:35:44But millions of people every year are still hit with penalties
0:35:44 > 0:35:47they can't afford.
0:35:47 > 0:35:50The only way you'll find out whether they've really reduced it significantly
0:35:50 > 0:35:53is by looking at the total amount they're taking off consumers.
0:35:53 > 0:35:57In 2006 they took off £2.6 billion.
0:35:57 > 0:35:59And here we are five years later
0:35:59 > 0:36:03and they're still taking over £2 billion per year.
0:36:04 > 0:36:07Shockingly, the amount banks charge for unauthorised overdrafts
0:36:07 > 0:36:11can equate to interest rates of hundreds of thousands of per cent.
0:36:11 > 0:36:13At the time we did our research,
0:36:13 > 0:36:20going £100 into the red unauthorised for a month with Barclays cost £88 -
0:36:20 > 0:36:24an APR of 366,000%.
0:36:24 > 0:36:31While borrowing the same amount for 30 days without permission from Santander
0:36:31 > 0:36:35would set you back £100 - that's over 800,000% APR.
0:36:35 > 0:36:40In response to complaints, the banks are planning to introduce
0:36:40 > 0:36:46new measures later this year - such as texting customers when their balances are low -
0:36:46 > 0:36:48to help them avoid bank charges.
0:36:48 > 0:36:51We think it's a step in the right direction
0:36:51 > 0:36:54but these charges can still accrue up to hundreds of pounds
0:36:54 > 0:36:58and we think they're still too high and still too confusing and still unfair.
0:36:58 > 0:37:02At the end of 2011, Howard finally received news
0:37:02 > 0:37:06that, in a court hearing he didn't even know was happening,
0:37:06 > 0:37:09a judge had thrown his case out.
0:37:09 > 0:37:11He's planning to appeal.
0:37:11 > 0:37:15We asked HSBC to comment. They told us:
0:37:33 > 0:37:36I was hurt, annoyed, angry.
0:37:36 > 0:37:38Perhaps my gran was right,
0:37:38 > 0:37:40keeping it in a tin under the bed might be the answer.
0:37:44 > 0:37:48Payday loans are big business in the UK.
0:37:48 > 0:37:53Between 2006 and 2009 the number of loans taken out
0:37:53 > 0:37:58quadrupled from 1.2 million to over four million.
0:37:58 > 0:38:01Many of those loans were taken out online.
0:38:01 > 0:38:05So just how easy is it to get hold of cash on the internet?
0:38:05 > 0:38:08Researcher Alice went surfing to find out.
0:38:08 > 0:38:14I've just done a search for payday loans online and there are 252 million results that have come back.
0:38:14 > 0:38:17These slider systems that are on a lot of these websites
0:38:17 > 0:38:21make it seem very easy, like all the cash is right there.
0:38:21 > 0:38:25Going online is the most expensive way to get a payday loan.
0:38:25 > 0:38:33Borrowing £200 over the internet for 30 days could cost up to £66 in interest and fees,
0:38:33 > 0:38:36compared with a maximum of £50 on the high street.
0:38:36 > 0:38:41It's all about fast cash, easy cash, anonymous cash, right now.
0:38:41 > 0:38:45The fact that they tell you you can have it in your bank within an hour,
0:38:45 > 0:38:47that's like a lifeline to a desperate borrower.
0:38:47 > 0:38:51It may seem like an easy deal, but borrowing online
0:38:51 > 0:38:59might have hidden dangers, as Joe Maloney discovered when he borrowed £150 from a company called Mr Lender
0:38:59 > 0:39:01to pay for some repairs on his car.
0:39:01 > 0:39:05A friend of mine told me there's these payday loan things on the internet
0:39:05 > 0:39:11so I went onto the internet and Mr Lender come up and within an hour I had the money in my bank.
0:39:11 > 0:39:15It was so easy that Joe soon took out several more loans -
0:39:15 > 0:39:19and then found he couldn't pay the money back.
0:39:19 > 0:39:23I lost my job so I couldn't pay them back anyway.
0:39:23 > 0:39:27When Mr Lender couldn't get hold of Joe at his old workplace
0:39:27 > 0:39:32they did something usually saved for naughty schoolboys - they called his mum.
0:39:32 > 0:39:36I first became aware that Joe had taken out this payday loan
0:39:36 > 0:39:40when I kept getting phone calls asking for the money.
0:39:40 > 0:39:45Mr Lender told Sue that the interest on Joe's loan was going up and up
0:39:45 > 0:39:49but they promised to freeze it if she could just make a small payment.
0:39:49 > 0:39:51I did say to them, "Look, I'm on a pension,
0:39:51 > 0:39:56"there is no way I've even got the amount of money you're looking for."
0:39:56 > 0:40:00Sue agreed make a one-off payment of £10
0:40:00 > 0:40:03and gave her debit-card details over the phone.
0:40:03 > 0:40:06She thought that would be the end of the matter -
0:40:06 > 0:40:08but a week later, her mortgage payment bounced.
0:40:08 > 0:40:13I got in touch with the bank, and I realised that there were
0:40:13 > 0:40:17various debits to this company Mr Lender.
0:40:17 > 0:40:20They'd taken the £10, as I'd agreed,
0:40:20 > 0:40:24and then they'd taken three further amounts.
0:40:24 > 0:40:29In total Mr Lender withdrew £310 from Sue's account
0:40:29 > 0:40:33on top of the £10 she says she had agreed to.
0:40:33 > 0:40:39It seemed that rather than just make the one-off payment Sue thought she had consented to,
0:40:39 > 0:40:43she had unwittingly agreed to more.
0:40:43 > 0:40:47We asked Mr Lender to comment. Mr Lender say...
0:41:16 > 0:41:20Other customers of different payday-loan companies have found
0:41:20 > 0:41:23that they have signed up to continuous payment authorities.
0:41:23 > 0:41:26CPAs allow a company to take out money whenever they want.
0:41:26 > 0:41:30So for example, if they want to take out £400 the first day
0:41:30 > 0:41:33and you've only got £300 in your account, they'll take that £300,
0:41:33 > 0:41:36then the next day they might come back for the £100 you still owe.
0:41:36 > 0:41:38Under a direct debit that's not possible,
0:41:38 > 0:41:42the company can only get money out the one time on the one day a month,
0:41:42 > 0:41:47so customers have a lot more security with direct debits than with continuous payments.
0:41:47 > 0:41:51Consumer Focus carried out research into continuous payment authorities
0:41:51 > 0:41:55and found many customers had no idea that's what they were agreeing to.
0:41:56 > 0:42:01And in 2010 the OFT banned one payday-loan company from using CPAs
0:42:01 > 0:42:05after it repeatedly took money from customers' accounts
0:42:05 > 0:42:08when they were already in difficulties.
0:42:08 > 0:42:13We don't think payday loan companies are making clear to customers when they sign up
0:42:13 > 0:42:16what actually is a continuous payment authority.
0:42:16 > 0:42:18Many consumers think it's the same as a direct debit.
0:42:18 > 0:42:22The way payday-loan companies are using this is totally unfair.
0:42:22 > 0:42:24They're taking money out any day of the month
0:42:24 > 0:42:29and taking out so much that at times the consumer doesn't have enough to live on.
0:42:29 > 0:42:31Payday loans should always be the last resort.
0:42:31 > 0:42:34If you've got to the point where you can't get to the end of the month
0:42:34 > 0:42:38and you need to go to a payday-loan lender to tide yourself over until your next pay cheque,
0:42:38 > 0:42:44you're clearly running very close to the limit of your financial capability
0:42:44 > 0:42:47and you can't do that month after month.
0:42:47 > 0:42:51Payday loans are absolutely dreadful.
0:42:51 > 0:42:55You know, I would worry about giving anybody a payday loan.
0:43:11 > 0:43:12Subtitles by Red Bee Media Ltd