Doorstep lenders can cause huge problems for consumers

It has been claimed in a recent report that doorstep lenders in the UK often cause huge problems for consumers because the loans that they offer can put borrowers in a cycle of debt that is difficult to escape. The OFT is now on a mission to try and protect vulnerable consumers from getting into financial hot water with these doorstep loans by making lenders prove that they are adhering to the Consumer Credit Act.

 

In the past eighteen months over 100 applications for licenses from doorstep lenders have been turned down by the Office of Fair Trading, and according to reports the watchdog has now written to around half of these companies asking for proof that they are adhering to the regulations and rules of the Consumer Credit Act. Companies have three months to provide this information.

 

Some doorstep lenders have been accused of misleading customers by failing to provide details about things such as their right to cancel, which makes some borrowers think that they are stuck in the credit agreement when in fact they are still within the time period where they can cancel. Others were accused of turning up at people’s houses without any prior notification or arrangement.

 

The crippling rates of interest charged by doorstep lenders have also been highlighted as a problem, and whilst the loans are only meant to be short term ones the APR that is charged by these lenders can be extortionate. This can quickly lead to already vulnerable consumers falling into even more severe problems with their finances. The OFT said that at this time of year in particular, with many people desperate for money to spend on Christmas purchases, tackling this issue was a priority in order to help people to avoid further debt problems and issues.

Tags: mission, recent report, year, notification, uk, severe problems, credit agreement, doorstep lenders