Call to extend payday loan safeguards to those taking home credit

PEOPLE TAKING out a doorstep loan should have the same protection as payday loan customers, which could save people millions of pounds worth of interest collectively every year, according to Citizens Advice.

More than 1.6m people use these loans in the UK, making it one of the largest high-cost credit markets, the charity said.

Its modelling found consumers end up paying back more than twice what they borrowed on up to 490,000 doorstep loans – also known as home credit loans – each year due to refinancing.

The charity said the Financial Conduct Authority’s clampdown on the payday loans market in recent years had been a big success, meaning consumers generally were paying less for loans and were more able to repay on time.

The clampdown capped the overall cost of these loans to consumers among other measures aimed at preventing payday loan borrowers from becoming trapped in a debt spiral.

Citizens Advice wants to see the same protections extended to the doorstep lending market.

It estimates that extending the same rules to doorstep lending could save up to £123m in interest payments on up to 540,000 loans each year.

It said home credit was the most common form of high-cost credit problem that Citizens Advice dealt with, with lenders charging interest rates of up to 1,557 per cent.

An FCA spokeswoman said: “The FCA took over regulation of consumer credit four years ago. In this time we have introduced new rules for the payday sector and credit card market. We have concerns about the impact on consumers who take out repeat loans. We intend to... take action where we find harm.”