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Bad debt? Selling high-interest loans on the doorstep

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.

Comments
Guest
lidad66 says:
2 October 2012

provident has many employees that are honest hard working people dont tarnish all with the same brush. and cone on you can make a half hour show make a saint look bad with editing. the guy complaining about paying for 17 years prob has had 17 loans in that time.and whats wrong with wanting to keep good customers all firms do that. provi provide a service to many who cant get credit elsewhere and do not charge extra on missed payments or overruns like pay day lenders. you know the ammount you borrow and have to pay back from day one that does not alter if you miss payments try that with wonga and others.

Guest

Hi lidad66,

I’m sure that the majority of people working at Provident are, like you say, honest, hard working people. I just wanted to highlight in my article that sometimes loan companies don’t act in the best interests of customers (such as through targeting vulnerable people like Shelia, or allowing debts to spiral out of control) and that more could be done to regulate the credit industry as a whole.

Guest
Kazy67 says:
9 October 2012

I have come close to having these high rate loans myself. If you desperately need the money to pay for something such gas bill, mortgage or other necessary bills, then turn to ever will help you at that moment. Fortunately I turned to a credit union. I work and pay my bills but there is always a bill that catches you out. In my case my car died on me. I have to have a car for my work on the community. If I didn’t I lose the job! I was very tempted by the loan company as when you are desperate, you worry about the long term debt once you’ve got out of the short term financial embarrassment.
As I said I joined the credit union and they helped. These credit unions should be made more public and readily available. Bring back doorstep sales people to help us save our money on a weekly basis rather than doorstep sales to take a loan out.
Unfortunately the loan companies help a lot of people out where other companies turn their back. People become stuck in a borrowing world

Guest

Im currently having bad experiences with my door step loan agent, taking advantage of my vunerability, i have four diagnosed mental disorders, my interest rates are more then the loan itself, the agent is also very innapropiate, touching my bum and back and standing over me always calling me love and his little fancy despite me telling him to stop he doesnt and asking me to go out for drinks with him and to come around to my home out of hours, he always asking personal questions and wanting details between me and my boyfriend, im a 28 year old woman and he is 74, recently being in a psychiatric hospital after an episode, he would come to the hospital to collect payments, this behaviour is wrong but im too scared to say anything hence the anon the rates are ridiculous ive had to lie about my financies to avoid him i know it will ruin my credit but whats the altrrnative, people like this need to be stopped and agents needs to be checked especially when theres vunerable people taking out loans.