Chimp or Chump?

A host of businesses are deliberately targeting Britain's poor. Think that the credit crunch has been bad for business? Not for these type of companies. Payday loans. Door-to-door lending. Rent to own. Pound shops. Over the past few years, nourished by the downturn, accelerated by developments in technology, firms in these sectors have provided quick cash or goods to those who couldn't secure credit from traditional sources. The poverty business is booming. These days, credit decisions can be made in an instant over the web. The borrower doesn't even have to fill out any forms: the calculations are made using the gigabytes of financial data stored about us online (or using no credit checks at all). And no one even has to know about it - borrowing money has become anonymised by the rise of the internet. The payday loan business alone is already worth £1.7bn. A generation of consumers has become used to this kind of instant gratification - six million people are predicted to take out payday loans over the next six months alone.

Britons are getting poorer every day. Real pay - the amount we earn adjusted for inflation - fell by 5.7%, from £542 per week to £511. That's the largest one-year fall in income since records began at the start of the 1960s. The Department for Work and Pensions has euphemism for the growing numbers of people living on or beneath the poverty line: Households Below Average Income (HBAI) - households earning less than 60% of the national average. Last year, 15% of the UK population - 9.1 million of us - fell into the HBAI bracket. That's equivalent to the population of Sweden.

For businesses targeting these hand-to-mouthers is a money-making strategy with a prosperous future. The Institute of Fiscal Studies predict that the average household will be even worse off by 2015.

 Leo McKee, the CEO of rent-to-own business Brighthouse extols 'Our stores look like a beacon. Our shop windows are bright and inviting. It's not everywhere that individuals on low incomes get treated with respect but they get treated like platinum customers at our stores.' Take a 60-inch Sharp telly home today and pay £25.29 (including cover) each week for 156 weeks - the perfect solution for a consumerist yet cash-strapped society. Of course, this comes at a price. A cost of £3,430.44 for a TV with a cash value of £1,548.54, to be precise. Brighthouse charges 29.9% APR over periods ranging from 52 to 156 weeks - and that's still not where it makes its real money. 'Extras' that let you return products or defer payments in cases of financial difficulty really bring home the bacon, explains McKee. The problem for the customer, of course, is that with deferred payments the interest piles on extra pounds.Consumer Wiki has calculated that a Brighthouse insurance policy can end up costing you £250 on an £800 cash price product.  He's opened 35 new stores this year, taking Brighthouse to a total of 265 outlets nationwide. 'If I opened another 200 stores tomorrow there would easily be demand,' he says.

Wonga charges 4,214% APR on its loans. In business terms, Wonga is a runaway success: profits rocketed 269% to almost £46m last year and a flotation is in the offing Newcastle United supporters are against Wonga's new four-year, £32m sponsorship of their club. Not only is money-lending against Sharia law - a key concern when your star players are devout Muslims - but Newcastle just happens to be the unemployment capital of the north-east. Labour MP Stella Creasy calls the outfit a 'legal loan shark'.  
A third of borrowers take out payday loans to pay off other payday loans; 60% of people use loans to pay bills or buy essentials like food, nappies or petrol; 46% of UK payday customers have an income of less than £15,500 a year; one in eight workers take out regular payday loans, costing them three days' wages. The BBC recently secretly filmed a debt collector from doorstep lender Provident. She explained: 'If you allow customers to pay up, they won't be customers any more. You don't ever want to let them pay up. You want good customers to stay in debt.' You want people to pay, but not too quickly!

For corporations in the poverty economy, finding the right kind of customer is key to success and profit. Data firm Experian use a system called Mosaic and is helping over 50,000 companies - including thousands of credit firms - seek out customers from 155 profile types, based on their location, income bracket, credit history, even intelligence. Wonga sponsors of Red or Black, the TV show where the only skill involved is to choose red ... or black. Madbid is an online penny auction frequented by three million registered users, all looking to bid on a bargain: 'discounts of up to 81%.' It is not technically a gambling site. One phrase comes up again and again in reference to Madbid: it is 'a tax on the stupid'. If you bid £50 and don't win your item, you can then get a £50 discount off the product on the "Buy Now". Unfortunately, your discount expires after only 24 hours. And what if users miss their Buy Now window, or - more likely - don't actually have the funds to buy the product at RRP like a car, one of the most popular auction items on the site.

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