Tactics of some doorstep lenders causing serious hardship for borrowers, warns Citizens Advice
Some doorstep lenders are taking advantage of their position and putting people at risk of serious debt problems, Citizens Advice warns.
A new report published by the charity today has identified a number of concerning practices by some doorstep lenders. The evidence, submitted to the Financial Conduct Authority today as part of its review into the high cost credit market, highlights:
Harsh debt collection methods - doorstep lenders, who earn commission on collecting repayments, have been shown to use intimidating behaviour which breach FCA debt collection rules to retrieve outstanding debts.
Citizens Advice helped one man with substantial doorstep loan debts who was visited by a lender on the same day his son had died. The lender refused to leave until a family member was taken down to an ATM to withdraw cash.
Another case saw a lender harass an elderly, blind woman for payments while she was in hospital receiving treatment for a stroke - despite repeatedly being asked not to visit.
Irresponsible lending - people are not being given satisfactory checks to make sure they can afford to take out doorstep loans.
One woman who had very little money to spare because she had a legally binding debt plan to repay nearly £20,000 was given 3 doorstep loans by 3 separate lenders - despite them knowing her situation.
Citizens Advice also raises concerns about lenders putting pressure on people already struggling with repayments to take out a new doorstep loan to cover them and doorstep lenders turning up unannounced at people’s doors to sell loans.
Doorstep loans are provided directly to customers’ homes by a lender, who returns each week to collect repayment. In the majority of cases, borrowers apply for the loan online or over the phone and are then visited by a lender with the cash.
It is estimated that over 1.3 million people in the UK use doorstep loans, with the average loan size estimated to be £500.
Last year Citizens Advice helped an estimated 23,000 people with unmanageable doorstep loan debts. Their average debt was worth nearly £700 and a third of people had taken out more than one doorstep loan.
Citizens Advice Chief Executive Gillian Guy, said:
“Some doorstep lenders are putting people at risk of escalating debts with their irresponsible actions.
“The personal nature of doorstep loan selling and debt collection can put customers in a vulnerable position. Our evidence shows some lenders are taking advantage of that relationship and causing serious harm to borrowers by turning up unannounced or putting clients under pressure to repay or take on more debt.
“It’s important there is strong regulation of high cost credit markets to make sure companies put the needs and interests of consumers at the heart of their services. The FCA’s intervention drastically reduced problems in the payday loan market - we now want to see similar protections introduced for consumers using other high cost credit products, including doorstep loans.”
As the Financial Conduct Authority’s call for evidence into the high cost credit market closes on Wednesday, Citizens Advice has submitted evidence and recommendations to improve problems in other parts of the sector - including the guarantor loan and rent to own market.
The charity wants the FCA to extend its cap on payday loan interest rates and fees across the market to protect consumers. It also wants the regulator to strengthen its affordability guidance into rules to ensure responsible lending across the market.
The charity’s new report includes further recommendations to improve the doorstep lending market, such as:
New rules placing a limit on the number of times a doorstep loan can be refinanced
A review of the methods doorstep lenders use to collect repayments
A ban on cold call selling of doorstep loans
A requirement for doorstep lenders to disclose the commission they make on collecting repayments so borrowers understand what is driving lenders action.
Notes to editors
- The Citizens Advice service comprises a network of local Citizens Advice, all of which are independent charities, the Citizens Advice consumer service and national charity Citizens Advice. Together we help people resolve their money, legal and other problems by providing information and advice and by influencing policymakers. For more see the Citizens Advice website.
- The advice provided by the Citizens Advice service is free, independent, confidential and impartial, and available to everyone regardless of race, gender, disability, sexual orientation, religion, age or nationality.
- To get advice online or find your local Citizens Advice in England and Wales, visit citizensadvice.org.uk
- You can get consumer advice from the Citizens Advice consumer service on 03454 04 05 06 or 03454 04 05 05 for Welsh language speakers.
- Local Citizens Advice in England and Wales advised 2.5 million clients on 6.2 million problems in 2014/15. For full service statistics see our publication Advice trends.
- Citizens Advice service staff are supported by more than 21,000 trained volunteers, working at over 2,500 service outlets across England and Wales.