Rules protecting payday lending customers should be extended to cover doorstep lending, a charity has urged.
Citizens Advice says that doorstep lending is a growing problem in the UK, with the organisation receiving about 30,000 requests for help in the last year.
It wants the rules which cover payday lenders to be extended to doorstep lending to prevent vulnerable consumers from getting into serious debt.
This would mean a limit would be placed on the number of times a loan could be refinanced and that the total repayment would never be more than twice the initial sum borrowed. This could potentially save borrowers £123 million a year.
Doorstep lending, which can be called a home credit loan, is a financial agreement made at home which sees a lending agent return each week to collect repayments.
More than 1.6 million people use home credit loans in the UK and in some cases doorstep lenders are charging interest rates of 1,557%. Those struggling with debts caused by doorstep lending are often unemployed or have a health condition or disability.
The consumer organisation also wants the Financial Conduct Authority (FCA) to force doorstep lenders to use stricter affordability checks to ensure potential customers can afford to repay the loan.
It says there has been a large fall in the number of people struggling with payday loans since tougher rules were introduced, and that extra rules in the doorstep lending market would have a similar effect.
Gillian Guy, chief executive of Citizens Advice, says: “There’s no questioning the evidence - the FCA’s cap on payday lending has been a success. But it’s time now to address the problems consumers are facing in the home credit market.
“Home credit customers need to be protected from getting into problem debt. They are susceptible to the high cost of these loans because of easy refinancing - and there is currently no total limit on what they repay.
“The FCA should build on the success of the payday loan cap and extend its definition of high-cost short-term credit to include home credit, making sure that no-one pays back more than double what they borrow.”