MPs call for a cap on doorstep loans

A campaign to cap the interest rates charged by doorstep lenders has received the backing of more than 150 MPs.

Doorstep lenders offer small loans, typically around £300, and then collect the repayments from the customer's house.
Lenders charge annual percentage rates of anywhere between 160 per cent and 800 per cent on these loans, however repayments are not normally extended over a year.

A report from the Competition Commission, points out that the method of collection is expensive, the risk of bad debt high, and there are barriers to expansion in the market, which limits competition.

But whatever the reasons for their expense, people who typically take out doorstep loans are more likely to be from vulnerable and financially worse-off sections of society than customers of more mainstream products.

As such, campaign group Debt on Our Doorstep is lobbing the government to cap the interest rates charged by doorstep lenders, to prevent the exploitation of people on low incomes.

Currently, more than 150 MPs from all parties have signed up to a House of Commons motion which supports a cap being placed on the interest rates charged by doorstep lenders.

"Low income households are being targeted and ripped off by doorstep lenders, paying way over the top for credit," said Liz Atkins, of the National Housing Federation.

"Housing associations are working hard to help those who are financial excluded but the government needs to go further if it is really serious about tackling the problem. It's time to cap the ridiculous interest rates set by home credit companies and doorstep lenders."

Niall Cooper, of the Debt on our Doorstep campaign, added: "Although there is now widespread awareness of the harmful effects of extortionate and predatory lending in poor communities, the government's response to date has been woefully inadequate.

"We hope that the Competition Commission, which is due to report shortly on the outcome of its inquiry into the home credit market, takes a much firmer line."

The Competition Commission has provisionally found that interest rates charged by doorstep lenders are too high, but notes that there are also many positive features to the market.

Many home credit customers like having their payments collected at their home, and value their relationship with the agent rather than seeing it as exploitative, the commission reports. XXX