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Last Updated: Thursday, 19 May, 2005, 12:51 GMT 13:51 UK
Doorstep commissions under attack
A wallet
Some doorstep lenders charge borrowers more than 100% interest
The National Consumer Council (NCC) has called for an end to commission payouts to doorstep loans salespeople.

Ending commission would curb "hard sales" tactics which see people on low incomes take out loans they cannot afford, the NCC added.

It also called for rollover loans - the lending of cash before the customer has fully repaid their current loan - to be banned.

The Competition Commission is currently investigating doorstep lending.

Low-income target

There's an incentive for agents to lend more than the customer really wants
Ed Mayo, NCC chief executive

Home credit normally takes the form of small cash loans, the repayments for which are collected in instalments by collectors who call at the borrower's home.

Many of the people targeted by door-to-door lenders are on low incomes and have poor credit histories and would often be refused credit by mainstream High Street lenders.

Interest rates on loans can sometimes top the 100% mark and consumer groups claim that this reflects lack of competition in the marketplace.

At present, 70% of the 2bn market is in the hands of four major providers, a state of affairs the NCC has described as "restrictive".

Sales incentives

An estimated 27,000 people sell loans door-to-door and the NCC argues that the commission structure encourages them to push loans to people who cannot afford them.

"There's an incentive for agents to lend more than the customer really wants," NCC chief executive Ed Mayo said.

Mr Mayo also called for a ban on rollover loans and the introduction of a code of practice for doorstep lending.

The Competition Commission will report its findings either later this year or early next.

Ultimately, the Competition Commission can force lenders to compete more actively, for example by providing customers with the information they need to compare the cost of loans from different providers.

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