Door step lending

balbs

The Competition Commission has ruled out imposing price caps on the door step lending industry.

The Commission said that: "despite its high cost, home credit is much valued by many customers and we would not be helping these people if we made home credit less available."

What do people think? Should the home lenders be forced to lower their rates or is the Commission right?

souwesterly

Having had the pleasure,:o over a number of years, of surviving on various government Benefits, door-step loans are a necessary evil. Although my circumstances have improved, I’ve been there so I understand the situation and I realise that these door-step loan companies do take considerable risks in lending money to (usually) unsecured people. Despite that, I still think that their interest rates are over the top.
Most, or at least a large percentage of people on Benefit (their customers, usually) have precious little creditworthiness. I’m not knocking them – it’s just a fact. To obtain credit even from a bank is hard work.
There are quite a number of door-step loan companies around and their interest rates are horrendous. As a typical example, my father-in-law recently borrowed £120 and is paying back £200 – but at £10 a week, he can manage that – and is quite happy to pay out. Few questions – no forms to fill – cash in his hand and his payments collected each week. Easy!

As far better alternatives, I would suggest the following:

Credit Unions – which are now operating in most towns and cities. You can borrow something like 10 times the weekly/monthly amount that you invest, at a low rate of interest. Fine if you have the time to invest and set up your credit status but not much good if you need the money NOW.

Benefit Agency Social Fund – if you’ve been on Benefit for over six months then you are entitled to make use of their Social Fund. A simple application will allow you to borrow – INTEREST FREE – up to £1,000 for a married couple (the individual rates, which have recently been increased are, as usual, complicated so I’ll leave them out). It takes about two weeks to be approved and paid into your bank.
Repayments are usually around £8 to £12 a week and are taken at source – painless!

Since man to man is so unjust
You never know which man to trust
Take my advice and never borrow
So pay today and live tomorrow.
(On an old 18C jug in a pub in Warwickshire)

Astaroth

Absolutely agree with the decision.

This general topic has been done to death but in short - loans are frequently low value and relatively short time scales. For a simple example a loan of £100 over 12 months at a capped rate of 20% (obviously still very high for a loan) would give the company £20.... for this they would have to pay the salary of someone to visit the house 52 times.... paperwork.... marketing.... bad debt provision... legal reporting... central function costs etc etc.

These companies would simply pull out of the market and people who need their services for what ever reason would potentially have nowhere to turn

Cumbrian_Male

balbs wrote:

The Competition Commission has ruled out imposing price caps on the door step lending industry.

The Commission said that: "despite its high cost, home credit is much valued by many customers and we would not be helping these people if we made home credit less available."

What do people think? Should the home lenders be forced to lower their rates or is the Commission right?

They also said that customers would get free statements that could be used as evidence of payment history, that home credit account histories would be reported to CRA's so again credit worthiness could be assessed by competitors.

Lenders over a certain size will have to provide a cost comparison to a new central website so that all companies products could be compared, and they have to fund the running cost of the website.

More beneficial rebates for early settlement to the consumer.

The full report can be found here

I think that the right decisions have been made, as at one point they were considering removing the requirement for the permission to call, which prevents canvassing of cash loans on the doorstep, this could have lead to high pressure sales tactics from unscrupulous lenders.

I work for Provident but all views are my own and not those of my employer.