News

Door to door lenders who prey on vulnerable people in need of a quick source of cash are to be investigated by the Competition Commission, writes Shirley Kumar.

The Office of Fair Trading referred the supply of home credit to the commission for further investigation following a complaint by the National Consumer Council (NCC).

The NCC and campaigners Debt on our Doorstep (Dood) complained to the OFT in June that more than 40 per cent of home credit customers had a long term illness, disability, or were caring for someone who was sick or disabled.

“We are confident that once the true scale of the problem is revealed, the veer of respectability that these companies have so far maintained will soon start to crack”, said Dood chairman Chris Gibbons.

More than half of current or recent home credit customers were on incomes less than £9,500.

70 per cent of the door to door lending market was run by four firms although there are 500 firms tradin in the UK, found the NCC.

The Office of Fair Trading said a lack of competition was leaving the poorest people with little bargaining power and vulnerable to high priced loans that are difficult to break away from.

Annual percentage rates ranged from 164.08 per cent to 903.13 per cent.

And most customers found it difficult to switch lenders because of high penalty rates.

To put people into deeper debt, lenders offered step-up loans or roll-over loans.

The OFT said outstanding national debt was valued at £2 billon and five per cent of adults had taken out a home credit loan in the past year.

Gibbons urged all credit unions, church groups, community associations and advice agencies to make a submission to the commission’s inquiry by the 21 January deadline.