A WEST Belfast credit union is advising people not to borrow from doorstep lenders after discovering the exorbitant interest rates that many borrowers are having to repay to clear off their loans.
SAG Credit Union in Andersonstown are worried that more people will be tempted to avail of doorstep lenders in the run-up to Christmas.
Seamus Judge, Credit Controller at SAG, said that some borrowers are paying up to 99.7 per cent in interest to service their loans. The credit union have worked with their own members recently to have accounts with doorstep lenders closed.
“It seems to be the most vulnerable people who are being approached by these doorstep lenders,” said Seamus. “Once they are in that vicious circle, they can’t get out of it.
“One member was repaying £150 a fortnight, which was £300 a month. So we were able to clear their loan with the doorstep lender. The monthly payment with us, including interest, is £140 and they will have it paid back quicker and accrued savings with us whilst paying it back.
“We have had cases where members have told us that they can’t get a final settlement figure from the lender because they don’t want the person to clear the loan.
“The customers aren’t informed of how much interest they’re paying or what their overall payment is. At least when our members leave here they know exactly what they are paying and what’s going to interest and what is going to the loan. In addition, they can get a settlement figure or statement of their account whenever they want and can repay the loan in full without any penalties.
“These are relatively small loans with doorstep lenders of £500 and £1,000 but they are paying double back. In addition, any time they have nearly cleared their loan in full the doorstep lender is back offering to lend them more money.”
Seamus said that the regulator, the Financial Conduct Authority (FCA), have done a lot in relation to regulating payday loans, including introducing a cap. But doorstep lenders, he said, have slipped under the radar, even though they have the same responsibilities to their customers that credit unions do. Under a new regulation known as the Consumer Duty, all lenders must treat borrowers, especially vulnerable customers, fairly and transparently, so everyone should be aware of their rights.
Seamus has a message for those who may be tempted to borrow from doorstep lenders ahead of the festive period.
“I would much rather people come to us in the run-up to Christmas than be so desperate as to go to doorstep lenders,” he said. “They probably feel under pressure because of the cost-of-living crisis but they will be left paying double back and in an even worse situation than before. And for those people out there who do not have a credit union account we would just say that it is never too late to join.
“The members in many cases are actually afraid to let us know what their situations are because we have maybe helped them when they have been in difficulties before. So we would say to all members of any credit union, do not be concerned, let the credit union know, that is what we are here for.
“If we do not know we cannot help them.”
