The Office of Fair Trading (OFT) has launched a crackdown against doorstep lenders as part of its effort to improve standards in the industry.
Doorstep lending often targets vulnerable people who would not be able to access finance elsewhere as they have poor credit records or a chequered financial history, such as a county court judgement against their name.
Over the last year, the OFT has found that more than half of applicants for a home collected credit licence, including those trying to renew, failed to convince the watchdog that they would provide customers with the right information and credit documentation.
The OFT said that while most large providers are compliant, smaller firms were often found not to have put appropriate compliance procedures in place.
These include failing to get permission from consumers to call in at their home to offer credit, a lack of pre-contract information, and no cancellation rights.
As a result, the OFT has sent letters to over 50 credit licence holders and applicants giving them three months to provide documentation that proves they are complying or will comply with the requirements of the Consumer Credit Act.
These letters also encourage lenders to join the industry trade body, the Consumer Credit Association, which provides additional support and advice on the use of documents and procedures that comply with the Act.
Recent enforcement action against doorstep lenders includes:
The OFT is also reminding people to choose their lender carefully and to compare costs of credit at www.lenderscompared.org.uk, an OFT supervised website that details all loans available from doorstep lenders.
"We are working to improve practices in the industry to protect vulnerable consumers. Over the festive period, people are often looking to borrow money to cover their additional costs," Ray Watson, director of the OFT's Consumer Credit Group, said.
"Home credit can be a good solution for some people, but we strongly encourage borrowers to shop around for the cheapest and most suitable credit product available to them."
Search for a loan to suit your financial situation using our Loans Search facility in partnership with Gateway2Finance.
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
Moneyfacts.co.uk will, like most other websites, place cookies onto your computer’s
hard drive. This includes tracking cookies.