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People borrowing from doorstep lenders should receive the same level of protection as those who use payday loans, according to Citizens Advice.
Editor at Credit Strategy. Previously held roles at Accountancy Age, Accountancy Daily and the Leicester Mercury.
Extending the same rules that cover payday loans to the doorstep lending market could prevent their customers getting into problem debt, and save up to £123m in interest payments on up to 540,000 loans each year, the charity said.
It is calling on the Financial Conduct Authority (FCA) to give consumers the same protections as payday loan customers by including home credit in its definition of high-cost short-term credit when it publishes its proposals for the high-cost credit market in the spring.
Specifically, it is seeking to protect consumers by limiting the number of times each loan can be refinanced and ensuring customers never repay more than twice what they borrowed.
The FCA said in January that it was concerned that some people could end up paying a much higher interest rate after merging old and new doorstep loans, and added that it intends to publish its conclusions in May.
Citizens Advice said it had helped 30,000 people with doorstep loan debt in the last year.
Only one third of them had a job, it said, and half were in arrears on council tax, a priority bill. Meanwhile, 43 percent were behind on water bills.
Nearly half (48 percent) have a long-term health condition or disability – higher than for all debt clients (40 percent) and more than twice the rate amongst the general population (18 percent).
Gillian Guy, chief executive of Citizens Advice said: “There’s no questioning the evidence - the FCA’s cap on payday lending has been a success. But it’s time now to address the problems consumers are facing in the home credit market.
“Home credit customers need to be protected from getting into problem debt. They are susceptible to the high cost of these loans because of easy refinancing - and there is currently no total limit on what they repay.
“The FCA should build on the success of the payday loan cap and extend their definition of high-cost short-term credit to include home credit, making sure that no-one pays back more than double what they borrow.”
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