Citizens Advice has called on the government to give consumers who take out home credit loans, also known as doorstep loans, the same protection that has recently been given to those with payday loans.
More than 1.6 million people use home credit loans in the UK, and the charity has said that copying the rules that stop payday loans being rolled over time after time would stop others falling into a spiral of debt.
The Financial Conduct Authority (FCA) has said it was concerned that some people could end up paying a much higher interest rate after merging old and new doorstep loans, and now the regulator has confirmed that doorstep lending is one of the areas of high cost credit that they have identified as having potential issues.
The FCA commented: ‘As we made clear in January, we have concerns about the impact on consumers who take out repeat loans. We intend to publish our conclusions in May and take action where we find harm.’
They added: ‘In the meantime we expect all lenders to check loans are affordable for customers rather than just assessing the credit risk to themselves.’
Citizens Advice said it had helped 30,000 people with doorstep loan debt in the last year. They confirmed that only one third of the people they helped had a job, and half were in arrears on council tax – a priority bill.
The charity has called for new rules put in place the same as have been for the payday loan sector, whereby the number of rollover loans are limited, and borrowers can never pay more than twice the amount that they borrowed.
Since the FCA took over responsibility for consumer credit in 2014 they have introduced new rules for both the payday loan market and credit card sector.
The conclusions of the FCA review into high-cost credit will be published in May.