Rent-to-buy goods 'can cost double'
The children's charity voiced "strong concerns" about the rent-to-own credit sector and said companies should be compelled to display the average internet and high street price of the product they are providing.
This should include the initial product price and optional service cover, according to the report titled A Vicious Cycle: The Heavy Burden Of Credit On Low Income Families.
The report argued that some rent-to-own credit providers make comparisons difficult by not consistently providing the manufacturer model numbers of items.
The list price of the rent-to-own washing machine was more than £150 more expensive than the high street one in the first place, and included £215 interest paid over three years as well as two years' worth of service cover costing £382. On the high street, three years of cover cost just £130 by comparison, the report found.
Barnardo's said that from its own experience many families use rent-to-own providers as they do not have access to banks which provide overdrafts and direct debits. It said bank accounts for those on low incomes must be "fit for purpose".
Speaking generally, Barnardo's chief executive Anne Marie Carrie said the most vulnerable families are falling into "an unaffordable debt trap". She added: "The poorest families are stuck between a rock and a hard place, with one in 10 households on low incomes managing their finances without access to mainstream banking services."
Excluding Post Office Card Accounts, one in 10 households with an income of between £100 and £200 per week do not have a bank account, compared with around one in 50 of those with incomes between £500 and £600 per week.
Barnardo's said the Government could ensure greater financial inclusion by extending Post Office Card Account facilities and said banks should also explore ways to encourage savings. The report also argued that more should be done to promote credit unions in helping lower income families.
© 2011 Press Association