Government orders crackdown on door to door lenders

    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.

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