Citizens Advice calls for greater regulation of ‘doorstep loans’

A new report from Citizens Advice has called on the Financial Conduct Authority to regulate doorstep loans, as it calculates that 30,000 people in the UK are struggling with debts on them.

The report, called Doorway to Debt, assessed the market for home credit loans in the UK. One of the largest high-cost credit markets in the UK, home credit loans are a form of credit typically collected from people’s homes on a weekly or fortnightly basis. Provident is the largest provider, advertising loans with APRs of up to 1550% in 2016.

In the last year Citizens Advice has helped around 30,000 people struggling with debts on such loans, far more than those struggling with payday loans. Those getting into debt are typically female, on low incomes and in rented accommodation. Only a third of those seeking help for debts on such loans were in employment and nearly half had a long-term health condition or disability.

Citizens Advice found that due to the personal nature of the relationships between debtors and lenders, many clients feel under pressure to repay these loans before other household bills. It found evidence that the very nature of such loans are pushing people into a spiral of debt, and exacerbating their financial problems.

Its research found that some clients were being offered unaffordable loans; that a third of clients were taking on multiple loans; and that customers can end up paying more than double what they borrowed on up to 490,000 home credit loans.

Citizens Advice Bureau is calling on the Financial Conduct Authority to extend its definition of high-cost short-term credit to include home credit loans. Regulation of payday lending has been a success story with consumers paying less for such loans and repaying on time. Including home credit within these regulations would limit the number of times each loan can be refinanced and ensure that customers never pay back more than twice what they have borrowed.

Citizens Advice estimates that such regulation could save consumers up to £123m on up to 540,000 loans.

  • Read the report here.


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