Doorstep loan companies are bombarding borrowers with phone calls and personal visits to pressure them into dropping complaints, legal experts have revealed. More and more desperate Brits who are struggling to make ends meet during the cost of living crisis are turning to the high-cost borrowers to pay bills and put food on the table.
Lawyers say it could end up costing double the amount they initially borrow, driving tens of thousands into a vicious cycle of debt and further poverty. And some lenders – who are also accused of mis-selling and not carrying out proper checks – are telling customers that lodging a complaint will affect their credit rating.
David Whelan from civil litigation specialist CEL Solicitors, who helps those with multiple doorstep loans, said: “Some of the people we’ve spoken to say they feel harassed and even threatened. They are being told to drop complaints or their credit history will be affected and the company will not lend to them again.
“These are often vulnerable people who have already been offered subsequent loans when they were unable to pay off the initial one. They are being put in a difficult position and then being bullied when they try to do something about it.”
Doorstep loans are legal in the UK and companies that provide them are regulated by the Financial Conduct Authority (FCA), while many also belong to the Consumer Credit Association (CCA). But Mr Whelan revealed he has seen a rise in the number of people being mis-sold the expensive products in recent years.
He added: “Doorstep loans can often be the only choice for those with a poor credit history who need cash over a short period of time. While they may only be for a relatively small amount of money – usually under £1,000 – the interest charged can be incredibly high.
“This means customers are paying back significantly more than they have borrowed. There is also a trend for more loans being offered on the back of the first one. Unfortunately, there are many instances of doorstep loan companies using bad practices and issuing unaffordable loans to customers.
“This can result in borrowers falling into a vicious lending cycle that is difficult to escape.”
CEL Solicitors highlighted one client who had built up around £30,000 of debt over a decade. When they looked at the case in more detail they discovered the borrower had been hit with around £23,000 of interest over that time – an astonishing 77 per cent of the amount borrowed. They too had been told by a loan company that continuing with a complaint would adversely affect their credit rating.
Mr Whelan said: “We’ve even heard of cases where loan companies are walking people to cashpoints to take out money and visiting hospitals to chase up payments.”
All regulated lenders have a responsibility by law to ensure the loans they’re offering are “reasonable and fair”.
According to the Financial Ombudsman Service (FOS), this includes completing adequate and proportionate checks on whether a customer is able to repay their loan without issue and ensuring the level of debt is not unsustainable or harmful if more credit is offered. Recent FOS records show that 110 of the 179 complaints against leading doorstep provider Morses Club have been upheld, and 321 of 782 complaints against Provident were upheld.
Meanwhile, there has been criticism of new-style loans that claim to cut interest if payments are made on time, but in reality offer minor savings and could lead to further borrowing. Social media companies have also been slammed for allowing online adverts for short-term lending that only reveal eye-watering interest rates of more than 1,500 per cent in the small print.
CEL Solicitors’ Mr Whelan said: “It’s vital that people who are vulnerable to falling into a vicious spiral of debt due to their economic and social situation are protected as much as possible.
“We are keen to pursue cases where people have been mis-sold multiple loans and we urge the authorities to come down hard on those found guilty of nefarious practices.”
