Doorstep lenders using ‘intimidating behaviour’ when collecting debts
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.
A report published today by Citizens Advice revealed some doorstep lenders are using harsh debt collection methods.
It said these doorstep lenders, who earn commission on collecting repayments, have been shown to use intimidating behaviour which breaches the Financial Conduct Authority’s (FCA) debt collection rules.
In one instance, Citizens Advice helped a 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.
In another case, a lender harassed an elderly, blind woman for payments while she was in hospital receiving treatment for a stroke, despite repeatedly being asked not to visit.
Citizens Advice was also made aware of irresponsible lending where people are not being given satisfactory checks to make sure they can afford to take out doorstep loans.
It dealt with a woman who had very little money to spare because she had a legally-binding debt plan to repay nearly £20,000 and she was given three doorstep loans by three separate lenders, despite them knowing her situation.
Last year Citizens Advice helped an estimated 23,000 people with unmanageable doorstep loan debts and it has today passed on its findings to the FCA and made recommendations to improve the high cost credit market.
It wants the FCA to extend its cap on payday loan interest rates and fees across the market to protect consumers as well as calling for the regulator to strengthen its affordability guidance into rules to ensure responsible lending across the market.
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.”