What are ‘doorstep loans’ and should I avoid them?

Hardly a week goes by where a doorstep loan company hasn’t made the papers for its unethical and dangerous business practice – and there are, of course, many financial sharks out there which consumers should avoid.

But are all doorstep loans irresponsible? And how do you know if you’re entitled to make a claim against a lender?

What is a doorstep loan?

A doorstep loan, also known as home credit, is often seen as an expensive way of borrowing money. The loans are usually small (even a few hundred pounds) and typically last for a few months. But in some instances, the loans can be much more and can last for periods of up to two years.

Traditionally, an agent would bring you cash to your house on behalf of the lender, and you would repay that agent weekly at very high interest rates of up to 1,557% APR.

Recently, mainly due to COVID-19, most lenders have brought the application process online and repayments are being made via direct debit. However, the additional charges have not been reduced, despite the added efficiencies.

Why do people get doorstep loans?

People that need cash and are facing financial hardship often opt for a doorstep loan. The lenders of this type of loan are more likely to lend to those with a poor credit history, and who may have been refused credit by mainstream lenders.

When might somebody make a claim against a lender?

As with any financial agreement, there are certain situations where people are wrongfully sold and are within their rights to make a claim against the lender. A few of these reasons include irresponsible lending, high-pressure sales tactics or the use of intimidation by the lender.

If you have signed up for a doorstep loan, and any of the following apply to you, you may be eligible to make a claim:

  • Your loan(s) should not have been approved because you couldn’t afford it/them
  • Your financial circumstances have changed, and you can no longer afford to make the repayments
  • You have experienced unfair treatment by the lender
  • The amount the lender says you owe is wrong (this could be about the total owed, interest being excessive or due to dishonest practices by the collecting agent)
  • You didn’t apply for the loan or other liability disputes
  • You are being chased for a debt by a debt collector
  • The agent didn’t turn up so you couldn’t make a payment
  • The agent was rude or intimidating
  • The agent told you what to put on your application form which was not a true reflection of your circumstances
  • The agent discussed your circumstances with someone else
  • You are a vulnerable individual and didn’t fully understand the loan agreement
  • You suffer from addiction(s) and therefore shouldn’t have been granted a loan.

What happens next?

In a lot of the cases that we have dealt with, loans have been classified as irresponsible or unaffordable, which means we will ask the lender to refund the interest and charges their customer paid, adding 8% interest.

We also ask the lender to make sure the customer’s credit file doesn’t have any adverse information recorded about the loan where we have identified proportionate checks would have clearly shown they wouldn’t be able to pay. If we decide that there was a point where the lender should have realised the lending was unsustainable, we will ask the lender to get the loan removed from the customer’s credit file.

If our claim is successful, the customer should have their refund within 10 weeks from submitting the complaint. If the lender argues the claim made, in most cases, we will appeal the decision through the Ombudsman, which may result in the process taking up to 6 months.

Our success rate on doorstep/home credit loans is 42%, and our Ombudsman appeal success rate is 67%.

Think you have a case? Don’t wait to find out, email [email protected] today to get advice from one of our specialists.

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