Responding to the Financial Conduct Authority consultation on High-Cost Short-Term Credit, Angela Clements, Fair For You CEO, said:
“We urge the FCA to stop credit being sold in the home: this practice, often by salesmen working on commission, just adds to an impossible spiral of debt for lower income households.
We see evidence on a daily basis of mis-selling of credit to people who have already defaulted on other loans, and who should never be offered more. Mr D, for example, was given five loans during 2016 totalling over £5,000, when he was displaying signs of financial pressure on the credit he already had.
“We are asking the FCA to act to protect those who are ‘just about managing’ until the occurrence of a relatively minor emergency, such as a broken washing machine. Under growing anxiety and stress, people in this position can easily make poor decisions when faced with a commission-based loans salesman in their home. The way to stop this is to ban doorstep selling and insist that applications for credit must be initiated by the customer.”
In its submission to the FCA, Fair for You has also called for three other changes to regulations:
- Lenders should be obliged to give borrowers a summary of the financial information contained on their credit file whenever offering or declining credit, to enable them to check for errors. Fair for You has substantial evidence of inaccurate credit files, which could unfairly prejudice lenders against potential borrowers.
- Credit files should be updated on a weekly basis rather than monthly, to give lenders a much more accurate picture of borrowers’ creditworthiness.
- Lenders should be restricted from offering ‘unstructured’ lump sum credit, such as sub-prime credit cards and mail order, to households with low creditworthiness where ‘structured’ repayment plans for goods are already in place. Fair For You believes that offering finance of this sort can be a cynical means for lenders to increase their profitability while trapping borrowers in debt.