George's easy credit drives French government crazy

France's first branch of Crazy George's, the British-owned furniture and domestic appliance chain, has had to close after only two days of trading amid a storm of political criticism over its sales methods. The store, which targets customers on low incomes and offers easy but expensive credit, opened last Saturday in Bobigny, a poor suburb on the east side of Paris.

After a swoop by trading standards officers last Sunday, the Economy Ministry announced that the store would close for an indefinite period. The ministry made it clear that the store had not been barred from trading, merely "advised" to improve the labelling of its prices.

A spokesman for the store said it would alter the labels to comply with all official requirements. The particular complaint was that the small weekly repayment sum appeared on the label in big figures, with the retail price in smaller figures and the total credit cost, which could be twice or three times the retail price, even smaller underneath.

Crazy George's specialises in giving credit on household goods to people who might otherwise be unable to afford them, including those on low pay or benefit. It offers a form of hire purchase, under which the customer makes small weekly or monthly repayments over a protracted period. The purchase remains the property of the company for the duration of the loan and may be returned (by the customer), or taken back (by the store) for default.

The difficulty, seized on by French politicians across the political spectrum, is that the repayment schedule may make the goods two or even three times more expensive than if bought outright. Examples included a washing machine for Fr46 a week (pounds 5.50), retail price Fr3,170 (pounds 377), credit price Fr7,176 (pounds 854).

In Britain, where there are already more than 50 such stores and hire purchase is common, this passed almost unremarked. In France, however, where medium-term credit is less common and less respectable, the terms at Crazy George's were decried as socially unjust and immoral.

Just how much of an issue the store had become can be gauged from the standing of its critics. The leader of the Socialist Party, Lionel Jospin, spoke of the "scandal of shops for the poor where they have to pay twice what the rich pay". The right-of-centre Economy Minister, Jean Arthuis, said it "passed the bounds of decency". A Gaullist minister, Eric Raoult, said it would marginalise the poor into particular shops and make their poverty permanent.

Trading standards officials have stressed that hire purchase as practised by Crazy George's is not illegal in France, nor is the interest rate, at around 40 per cent, and the store should be able to reopen when its labels are considered satisfactory.

But a clearer statement of the discrepancy between the price of a fridge bought over three years and one bought outright is unlikely to deter those whoneed a fridge now and for whom this is the credit available. The management described customers' response in the first two days as "very favourable".