Clampdown on doorstep lending

Figures out today show that the average personal debt has risen by 50% since 1997 to more than £5,000.

The Office of National Statistics reports that we now owe an average of £5,330 in unsecured debt, which excludes mortgages.

Worrying figures - but more worrying perhaps is the increase in doorstep selling.

It's a confusing issue though - licensed doorstep lending tends to be rife in low income areas where borrowers often say they like dealing face to face with the lender.

Some even form long-term friendships from the arrangement.

Super complaint

But the National Consumer Council thinks that the users of this credit may need more protecting when the cost gets out of hand.

It's threatening doorstep lenders with a so-called super complaint, which could result in a clampdown on their activities from the Office of Fair Trading.

As Frances Harrison from the National Consumer Council (NCC) points out, "For every £100 that's borrowed, £40 goes back in interest."

But some borrowers feel they need emergency lending for new clothes for children going to school, or other unpredictable outgoings.

And their choices are limited - banks aren't interested in risky business, so if it's not the doorstep lender, commonly it's expensive credit from a catalogue or shop.

Essentials

One in five are driven to borrow at high interest, but when you ask people whether they'd like a doorstep lender, the frequent answer is no.

One viewer, Constance, insisted, "I'd go to my children - I wouldn't ask anyone else."

One case Working Lunch highlighted was that of Cathy Haines, who ended up borrowing from three different doorstep lenders, just to buy essentials for the home.

One of these included the biggest in the market - Provident Financial.

But some lenders say that the threat of a super complaint is a red herring because new rules for the industry are being devised anyway.

Crisis

John Lamidey from the Consumer Credit Association says, "I'm quite surprised really because the NCC has been involved with the government for the last two and a half years on a comprehensive review of the credit act.

"If there are changes necessary to the way in which credit is provided, then that would clearly be the forum to air those views.

"I've been to all the meetings and I haven't really seen the NCC there very often."

It might be one idea to join a credit union, but because you have to build up a savings history before the credit union will lend you money, this route isn't much help in a crisis situation.

That is why three million people continue to use the services of "home credit providers", as they call themselves.