You might have tuned into ‘Debt on the Doorstep’ on BBC Panorama last night. One provider was shown selling high-interest loans to a woman with schizophrenia. Isn’t it time for better regulation of loan companies?
We all know that some loan companies are far from perfect – online payday lenders have come under criticism for charging interest rates of over 4,000%. But when the BBC uncovers lenders apparently earning commission for selling high-interest loans to vulnerable people on their doorstep, you know it’s time for change.
Last night’s Panorama showed Provident Financial lending thousands of pounds at a high rate of interest to Shelia, a 60-year-old woman living on her own who had been diagnosed with schizophrenia. Her sister was understandably angry, saying on the programme that ‘it’s disgusting, they’re taking advantage of her’.
Getting stuck in a spiral of debt
Another doorstep borrower, Joseph, explained on the programme that he had been in debt to Provident for 17 years. With a £1,000 loan costing as much as £2,120 in repayments over two years, you have to question whether loan companies are acting in the best interests of consumers.
One thing in particular that sent a shiver down my spine was when a doorstep lender, who earned commission on new loans she sold to customers, said to an undercover BBC reporter that ‘you don’t ever want them to pay up’.
In a statement to the BBC, Provident Financial said it has strict policies to prevent loans being sold to anyone it believes doesn’t have the mental capacity to understand the terms. The company added that it’s properly regulated and adheres to OFT guidelines on responsible lending, and further that it ‘only lends amounts appropriate to the personal circumstances of each customer’.
How should the credit industry be regulated?
It’s not just doorstep selling that’s the problem. We found some online payday loan companies encouraging borrowers to take out expensive loans with insufficient credit checks, unclear T&Cs, badly explained charges, and interest rates as high as 14,348%. If this kind of practice is allowed, it seems to me that rules governing how these companies operate are in need of an update.
In the next six months the government is going to begin reviewing how credit is regulated. It’s important that this opportunity to improve the way loan companies operate stops vulnerable people such as Shelia from being exploited.
When it comes to high-cost credit, we want to see transparent and proportionate costs, clear information about risks, a cap on the total cost of default charges, and proper affordability assessments. There also needs to be key protections in place, with the regulator being able to take swift and effective action against loan companies that break the rules.
Do you agree that the high-cost credit industry needs to change? And if you’ve had a doorstep lender knocking on your doors, we’d be interested to hear from you.