Doorstep lender rapped for questionable lending

An undercover investigation by the BBC has revealed that a major UK doorstep lender has been offering high interest loans to some highly vulnerable individuals - including a diagnosed schizophrenic who was offered a number of loans.

So how is this possible?

The programme

The investigation, shown tonight on Panorama, looked into practices by doorstep lender, Provident Financial, and discovered a number of ways in which some staff members were falling foul of the OFT rules designed to protect vulnerable people - such as the elderly, disabled, or very sick.

Among the most striking was an agent that admitted to undercover reporters that a customer was 'not all there' and yet, the company had been selling to her for years. The girl's mother said that anyone meeting her could see she was unwell, because she talks as if she has three or four voices running around her head.

Response

Provident Financial said in a statement that its policies prevent anyone from selling any loan to an individual who may not have the mental capacity to understand what they are doing. It added: "with 1.8 million customers we will not always get it right and if we make a mistake we work hard to put matters right".

It continued that it is properly regulated and adheres to the Office of Fair Trading guidelines on responsible lending. It said: "Provident has strict policies in place to prevent loans being advanced to anyone it believes does not have the mental capacity to understand the terms of the loan they are taking out, whilst at the same time ensuring that it does not discriminate against anyone, including those with mental illness but no loss of mental capacity."

It added: "Provident takes great care to ensure that it only lends amounts appropriate to the personal circumstances of each customer." It pointed out that 80% of loan applications are rejected, and that it has a 90% customer satisfaction rate.

Structural problems

The OFT guidelines themselves leave some room for judgment calls, because they state that although vulnerable people should be protected, the salesperson should start with the assumption that they do have the mental capacity to make a financial decision - because being elderly or mentally ill does not necessarily mean an individual is unable to make wise financial decisions.

Of course, these incidents were not the only issues revealed by the programme. It also highlighted the extremely high rate of interest on the loans, and the fact that some people were stuck in a cycle of debt.

It may come as a surprise that these sorts of things are going on, just two months after the industry unveiled a code of practice that was intended to clean up high-interest lending. At the time, Business Minister Norman Lamb said:"The new Codes of Practice represent a positive and important step forward by the payday lending industry. They will have a real impact helping consumers to make the right decisions when they opt for a payday loan, ensuring they do so fully informed and are not caught out by hidden charges."

It begs the question that if we are so shocked when we see these things on a TV documentary, why that shock isn't being translated into concrete legislation rather than a voluntary code.

What do you think? Let us know in the comments.