Companies that lend people money and charge them sky-high interest rates might say that they are helping people by giving them the chance to get cash quickly.
Instead, they put the poor in a lot of debt. So says the Competition Commission, which will tell these businesses quickly and clearly that what they are doing is wrong.
The commission is likely to tell you that these companies have turned into sharks, which prey on the weakest people in society because they earn the least and have no other way to get credit.
It's sad that these places are said to charge up to 1,000% interest per year on loans, which they do over and over again. Even though it sounds crazy, that's what the Competition Commission is telling us. Let's take a moment to put this in its proper place. The more trustworthy companies charge 177 percent, which is an unbelievable amount on its own.
The worst part is that 2 million Britons reportedly buy into these kinds of deals. This is only because they don't have much money and the places that lend money on a typical high street wouldn't dream of letting them in.
But finally, the commission is standing up and saying, "Enough is enough." It makes it clear and public that interest rates of even 177 percent, let alone 1000 percent, can't be justified in any way.
It wants to force these shady businesses to tell a customer how much the loan will cost. The idea behind this is that if a customer borrows GBP100, they will have to pay back GBP200. This might make them think twice.
When it comes to stopping bad money lenders, the next step is to threaten them with a maximum legal interest rate if they don't stop using unfair methods. This means that if they then go ahead and raise the interest rates very high, they will be breaking the law.
In the UK, there are about five major players in the home credit industry. One of them has half of the market share, and another 500 have a smaller share.
Their clients? Most of the time, they are single parents who live in areas with a lot of poverty. Debt collectors show up at their front door, usually once a week or every two weeks, to get the money.
You might think that people with little money are a high risk and that debt collectors are allowed to charge high interest rates because they are doing their job.
But interest rates as high as 1,000%? Or even 177 percent ? One could say that there is no reason for rates to be that high.
Provident Financial, one of the money lenders in the market, says that they have credit cards with interest rates of 70%. But the customer knows right from the start what they are getting into.
With the agreement comes the statement that "customers are not paying too much for their home credit loans, and the home credit industry is not making too much money."
But if you take this back to the Competition Commission and ask if they agree with this statement, they will say no.
What the Commission wants, and what it plans to get, are rules that will lower the interest rates on these loans and force "loan sharks" to say in full what the real cost of the loan is. At the end, when everything is paid off, so the customer knows what they are getting into.
The commission is supposed to come out with new rules in the summer.
The Competition Commission hopes that when the new rules come out, people will realise how much they are paying for this cash up front and start to avoid these types of loan companies like the plague. And the only people left are those who are willing to play fair.
