Here’s an amazing thing. Christmas savings clubs still exist. Three years after Farepak collapsed, leaving well over 100,000 mostly low-income savers in the lurch, thousands of people are still handing monthly cash sums over to the likes of Park (“the UK’s No. 1 for Christmas savings”) and getting ripped off at every turn as they do so.
They get to pay in advance for vouchers they won’t receive until November or December – effectively handing any interest they might have got on their savings over to their provider.
That’s a big deal at the best of times, but an even bigger deal now inflation is rising again. They then get to use those vouchers to pay for goods they could get elsewhere for a fraction of the price were they able to shop around.
Take the 12″ Barbie bike on offer from Park. It costs £94.99. Sound OK? It isn’t. Take yourself off to Argos and you can have a near-identical (if not Barbie-branded) one for £39.99. That’s less than half the price. As a way to make sure the poor stay poor this is hard to beat. But there’s more.
Christmas savings clubs are still not covered by the Financial Services Compensation Scheme. Instead, they can be (but don’t have to be) members of their trade association, which says it obliges them to keep client money in a separate “trust” account and to “behave in a professional manner”. It’s not quite the same is it?
The Christmas clubs claim that they’re worth it because they make saving so easy and convenient (the free catalogue gets delivered to your door and so do your vouchers and goods). But it’s hard to believe that if their victims really understood the price of that convenience (£55 in the case of the girl’s bike) they’d be willing to pay it.
I was asked last week what I thought should be done about this – perhaps, said my BBC interviewer, the government should be working harder to prevent the exploitation of the financially vulnerable? I’m not so sure. Given the seemingly unlimited ability of the financial services industry to rip us all off all the time (I give you store cards, sell to rent, sub-prime, guaranteed equity bonds, with-profits, fund management fees and the banking system as a whole) this would be a pretty unending task.
Instead, the government should be working to reduce the supply of financially vulnerable people available to be exploited (via the education system). This is something successive governments have clearly failed to do.
Our current government has spent over ten years telling us how very important education is – they were at it again this week with the proposal for a Consumer Financial Education Body and the odd Pupil Guarantee offered up in the Queen’s speech. Yet Park still claims that 400,000 families save with it. I can’t think of a more graphic illustration of policy failure than that.