Charity calls for further protections to consumers of 'doorstep loans'

Independent charities network Citizens Advice has called for people utilising high-interest "doorstep loans" to be provided with the same level of protection as those with payday loans in order to be spared millions of pounds of excess fees and charges per year.

Across the UK, more than 1.6m Britons use door-to-door loans, also referred to as "home credit", one of the largest segments of market for high-cost credit in the nation, with consumers generally paying back more than twice what they had initially borrowed, Citizens Advice claimed.

The charity highlighted the "irresponsible lending and the increased cost of borrowing due to refinancing, pushing home-credit users into a spiral of debt" as a growing point of concern.

A Monday morning report by Citizens Advice, entitled Doorway to Debt, stated that extending legislation that covers payday loans to the doorstep lending market would save as much as £123m in interest payments on as many as 540,000 loans each year.

The Financial Conduct Authority's recent attempts to put a stop to payday loans saw consumers begin to pay less for their loans, increasing their ability to repay them on time after the clampdown led to the total cost of the loans being capped in order to stop borrowers from being trapped into further debt.

"There's no questioning the evidence, the FCA's cap on payday lending has been a success," said Gillian Guy, chief executive of Citizens Advice.

"But it's time now to address the problems consumers are facing in the home credit market. Home credit customers are susceptible to the high cost of these loans because of easy refinancing, and there is currently no total limit on what they repay," he added.

In 2017, Citizen's Advice aided 340,000 Britons stricken with debt, roughly 30,000 of which were struggling to repay doorstep loans where lenders had charged interest rates as high as 1,557%.

Of those 30,000, the charity stated that 48% had a long-term health condition or disability, only 32% were in work, half had council tax arrears and 43% were behind on their water bill payments.

"Doorstep lending is one of the areas of high-cost credit we have identified as having potential issues. As we made clear in January, we have concerns about the impact on consumers who take out repeat loans. We intend to publish our conclusions in May and take action where we find harm," an FCA spokeswoman said.