Watchdog tells doorstep lenders to improve or face action

More than 50 doorstep lenders have been warned to improve their standards or face action from the trading watchdog.

The Office of Fair Trading said it had taken enforcement action and sent letters to more than 50 firms in the home credit sector, as part of its work to improve standards across the industry.

It said more than half of all applicants for a home collected credit licence during the past year had failed to satisfy it that they would provide customers with the right information and credit documentation, including applications from firms that were renewing their credit licence.

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The group said although most large providers and lenders which were members of trade associations complied with its requirements, other firms had failed to put appropriate compliance procedures in place.

Problems included failing to obtain permission from consumers to call at their homes and offer credit, not supplying pre-contract information and not talking people through the costs of the credit.

Doorstep lenders advance small sums of money, often for short periods of time, to borrowers who would be turned down by mainstream firms. They typically charge interest equivalent to 270 per cent a year.

The watchdog carries out extra licensing checks on the sector as it considers the lending to be high risk, due to the potential vulnerability of borrowers.