Call for tighter controls on doorstep lending

A consumer group today renewed its call for a shake-up of the UK's ?2bn home credit market in a bid to protect vulnerable people.

The National Consumer Council (NCC) said it wanted doorstep lending to be made fairer and more competitive for the millions of people on low-incomes who currently use it.

It wants to see a change in the way agents are paid so that they are not under pressure to encourage people to borrow more, and a ban on so-called roll-over loans under which people are encouraged to take out increasingly large loans as they pay off existing debt.

The group is meeting the Competition Commission today as part of an ongoing inquiry into the market.

Last year the NCC made a super-complaint about the industry to the Office of Fair Trading (OFT) which led to the current inquiry being launched.

Home credit agencies offer small, short-term unsecured cash loans, often as little as ?100, to people who could not borrow money elsewhere.

But research carried out by the NCC found that people who used doorstep lenders were unlikely to shop around for a better deal because of the relationship that developed between them and the collectors.

It added that the deals were often expensive with annual interest rates averaging 177%, with some deals reputed to cost 900%.

The group argues that because agents are usually paid through commission there is an incentive for them to lend more to people than they need. There are also no independent checks on what goes on between agents and customers in their home.

It is calling for the Competition Commission to look at ways of regulating the customer-agent relationship, such as by introducing a code of practice and changing the way agents are paid.

It also wants roll-over loans to be banned and data sharing between lenders to increase so that customers with good payment records have a greater choice over who they borrowed from.

Ed Mayo, chief executive of the NCC, said: "There is no reason why low-income consumers should put up with less competition and lower standards than everybody else.

"Agents may be the friendly face of home credit companies, but in the unique setting of the home, consumers are also vulnerable to approaches that lock them into a long-term borrowing relationship with one home credit provider.

"A ban on roll-over loans with the same provider, alongside other key reforms to the agent-consumer relationship, could go a long way to injecting more competition to benefit customers."