LIVING IN DEBT

IN THE RED | Debt can spiral out of control quickly

Living in debt is a fact of life for many householders. Inside Out investigates how money lenders are targetting some of the most vulnerable people on the South's housing estates.

Being in debt isn't a new phenomenon, but it's increasingly common in today's credit-obsessed society.

More people are living on what used to be called "the tick", with consumers running up more and more credit, and many increasingly falling into the debt trap.

But what happens when consumers turn to loan companies to help them with their accumulated debt?

Borrowing money

Money lenders have always been a feature of our lives, dating back to the middle ages.

Living on credit - we are a nation of borrowers

But today's money lending companies are one step ahead of the game.

They're well organised, and highly persuasive in marketing their services.

They're more subtle than the old-style, debt collectors. They just keep on coming around and around and around.

Inside Out sent a reporter to work for Shopacheck, a national company which offers loans to people who have no access to conventional credit.

Shopacheck has a turnover of £150m. It charges customers an annual percentage rate (APR) of 440% on its standard £100 loan.

This compares to the average loan percentage rate of about 10%-30% from most high street banks.

Vulnerable debtors?

Inside Out's reporter was sent to be trained in Southampton by one of Shopacheck's top debt collectors, Carol Greenwood.

Greenwood describes the collectors as "loan sharks". She admits that the company targets people who cannot afford the loans they are taking on.

"You're going to pick on Mr. and Mrs. Vulnerable aren't you? People who need something now and don't care how much it is going to cost," she said.

The programme shows how Carol Greenwood extracts money from customers who are struggling to pay.

When she visits her clients, Carol often spies through their keyholes to see if they are at home.

High interest credit

The effects of this type of lending can be seen on the Whitehawk Estate in Brighton, where there are at least half a dozen companies offering high interest credit.

Many of those in debt are on benefits

A former Shopacheck collector says that he used to collect £2000 a week on Whitehawk Estate.

Many of his customers were on benefits, but he was still allowed to lend them large sums of money.

“To start with you could lend £100 in vouchers to a new client,” says the former Shopacheck collector.

“If they paid that - OK, then you could increase it over a period of time, just judging by the way they paid.

“The people on income support are on guaranteed money so they are probably a safer bet than the people who are working,” he says.

Debt dilemma

Single mother Sandra Burtenshaw lives on the Whitehawk estate.

She borrowed money from a number of lenders and was soon expected to pay back £130 a week from her benefits.

She says, "Nearly every night I wouldn’t sleep, wondering where I would get the money from, knowing that they would be knocking on my door.

"It just used to go round and round my head. I used to think what can I sell in my house just to get some money for my kids."

The money lenders

Shopacheck refused to be interviewed for the programme, but issued the following statement:

Payback time - debt collector Carol Greenwood in action

"Shopacheck is a responsible lender and cares about its customers and representatives. Shopacheck is licensed under the Consumer Credit Act and conducts all its operations in accordance with its regulatory requirements.

"The BBC refused to show us the footage prior to screening meaning we were unable to comment. We will of course take all criticisms seriously and investigate them thoroughly."

But the National Consumer Council thinks that the users of this credit may need more protecting when the cost gets out of hand.

It is threatening door-to-door lenders with a complaint, which could result in a clampdown on their activities from the Office of Fair Trading.

The debt trap

A lot of people get into debt because of circumstances beyond their control.

Keeping a budget allows you to get an accurate picture of your financial position - your incomings and outgoings.

It will show how your money is being spent, and allows you to set spending priorities, and highlight where savings can be made.

Another good way to keep on top of your finances is to evaluate your standard of living.

If you're spending too much on clothes, household goods, holidays or the Internet, you need to cut back.

Think ahead and try to anticipate any spending peaks.

Don't take on major loans if you can't really afford to pay them back, rather than exposing yourself to enormous risks.

Assess your current financial position and look at whether you're in danger of getting into serious debt using the special BBC cashometer.

Know your limit

Watch those pennies and pounds - it could make a big difference

Get out of the habit of spending to the limit, and cut back on non-essential luxury items if you're feeling the financial pinch.

If you do get into debt, talk to an expert and get professional advice.

There are many organisations who can help with specific problems.

The National Debtline runs a freephone help line on 0808 808 4000.

Another good source of advice is the Consumer Credit Counselling Service on 0800 138 1111.

Credit Unions - a lifeline

For those desperate to get their finances straight, local credit unions can be a good alternative to money lenders.

A credit union is a savings and loans co-operative run by its members for its members.

Credit unions can provide an ethical and local alternative to mainstream money lenders, offering savings and good value loans.

Members regularly save as much as they can afford. Once members have saved regularly for a minimum period, they can apply to borrow up to two or three times the amount saved.

By law, credit unions can charge a maximum of 1% interest per month on the money they lend to their members.

Escaping the debt trap

The best way of escaping debt is not to run up bills you can't pay back in the first place, of course. So follow our guide to staying in the black.

If you do find yourself in heavy debt, get expert advice and don't let things get out of hand. It could save you a lot of grief and worry.

In the meantime find out your attitude to debt and see if it could get you into trouble.