Credit firms 'target homeless'

Credit card companies are targeting the young and homeless with promotional material and dubious lending practices, even though the group is particularly vulnerable to debt, research from Centrepoint shows.

"We've become alerted to something that's more of an issue to young people than we thought," said chief executive Antony Lawton.

"We're going to be doing a second stage of research to understand more precisely the approaches that are made to the young people, both directly at hostels and services we run and on the street and in stores."

The research found that companies lift credit card limits without being asked and that homeless young people are susceptible to other pricey but accessible credits, such as store cards and mail-order catalogues.

Debt can prevent young people from securing a stable future, said Lawton, because a poor credit rating restricts access to student loans and thus to education. Of more than 100 people Centrepoint surveyed, 82 per cent owed an average of £1,000 and one was £15,000 in debt.

Centrepoint said it won't approach credit card companies until it has investigated further, but is talking to the Financial Services Authority and the Citizens Advice Bureau, which is assisting with debt advice. Lawton stressed that this would not turn into a 'name-and-shame' exercise and agreed that affordable credit can be essential if, for example, payment of benefits is delayed.

Centrepoint has recently changed its own policy on arrears at its hostels.

"Three or four years ago the level of arrears was too high," said Lawton.

"We're not doing young people any favours if we're not trying to prevent people getting into debt. Now we are saving £500,000 that we used to lose through a mix of bad debts and not filling our bed spaces adequately."

Occupancy rates are now higher - a sign that Centrepoint is managing resources better, Lawton said. "It's not an indicator about demand. It's an indicator that we have greatly improved our management of services."

It is also running financial literacy courses, with funding from Friends Provident.

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