Home credit, also called doorstep lending, is a loan where the lender calls at the borrower’s home to collect repayments. Citizens Advice describes the loans as usually small and carrying a high rate of interest. The rules on offering credit at the door come from the Consumer Credit Act 1974, which applies across the UK, and from FCA guidance; Citizens Advice’s own advice pages are written for England and have separate versions for Scotland, Wales and Northern Ireland.
Authorisation: the first check
Citizens Advice states that home credit lenders must be authorised by the Financial Conduct Authority. It adds that agents of a home credit lender do not need their own authorisation and can come under the authorisation of the lender they represent. It advises asking to see the authorisation of the person or their lender before borrowing, and says that a person without one is operating illegally, in which case the borrower should avoid the loan. Citizens Advice adds separately that a borrower who takes a loan from an unauthorised lender has not broken the law: the lender has.
The canvassing offence
Section 48 of the Consumer Credit Act 1974 defines canvassing off trade premises: soliciting a person to enter a regulated agreement by making oral representations during a visit to a place other than the business premises of the creditor, supplier, canvasser or consumer, where the visit was not made in response to a request on a previous occasion. Section 49 makes it an offence to canvass debtor-creditor agreements off trade premises. It also makes it an offence to solicit an individual during a visit made in response to a request that was not in writing signed by or for the person making it, where the soliciting would otherwise have counted as canvassing.
Citizens Advice summarises the effect: it is a criminal offence for a lender to call at your home to offer to lend you money unless the visit is made in response to a written and signed request. It adds that if an agreement is not properly made, the lender may not be able to force the borrower to repay the money.
What counts as a valid request
The FCA’s guidance in CONC 3.10.3G sets out its view of sections 48 and 49. Discussions about new borrowing or refinancing in the borrower’s home must be initiated by the borrower, either by a specific written request or, only where the individual is in the borrower’s home for another purpose, by an oral invitation. A valid request is a positive act by the borrower taken specifically to discuss other borrowing; the visit should be made in response, within any timing the borrower specified or within a reasonable time; and a separate request should be made for each agreement or contractual variation.
The FCA is critical of so-called “umbrella requests”, signed when entering an agreement and purporting to allow home visits about other borrowing at any time. In its view they do not meet the requirements of the Act because they create open-ended opportunities to raise additional borrowing. The guidance adds that an agent visiting only to collect on an existing loan is not stopped from discussing new borrowing if the borrower asks, but that if the agent raises new finance it would be very difficult to show the visit was not made with that purpose. CONC 3.10.4G confirms that breaching section 49 is a criminal offence, and only a court can decide what sections 48 and 49 mean.
Fair treatment and other rules
Citizens Advice also notes that lenders must follow rules to make sure customers are treated fairly, and that complaints can be made where they are not followed. CONC 3.10.2R adds that a spoken promotion made to a customer outside the firm’s premises may only be made at an appropriate time of day, and the person must identify themselves and the firm and make the purpose clear at the outset.
Vouchers, complaints and illegal lenders
Doorstep lenders may also offer trading cheques and vouchers, which Citizens Advice says can be exchanged for goods, usually clothing and soft furnishings at specific shops, and repaid to an agent who normally calls at the home; interest rates are often high. Many home credit lenders belong to the Consumer Credit Association and follow its Code of Practice, so a complaint about a member can go to the association. If someone lends without FCA authorisation they are a loan shark, and Citizens Advice says a borrower who is threatened should contact the police straight away and can report illegal lending to the Illegal Money Lending Team.
FAQs
Can a lender knock on my door to offer me a loan?
Not unless invited. Citizens Advice says it is an offence for a lender to call to offer a loan unless the visit follows a written and signed request.
Does a collection agent need separate FCA authorisation?
According to Citizens Advice, agents can come under the authorisation of the lender they represent, so check the lender’s authorisation.
Can a general permission to call cover future loans?
The FCA says an “umbrella request” signed at the start of a loan does not meet the Act’s requirements, and a separate request should be made for each agreement.
Bottom line
Home credit is regulated credit, so the lender must be FCA authorised, and the law sharply limits when a lender can raise new borrowing at your door: only in response to a written and signed request, not through a blanket permission. Anyone visited without a request, or threatened over repayments, can seek advice from Citizens Advice, the FCA or the police as appropriate. This is general information, not legal advice.
Sources
- Citizens Advice, “Home credit (Doorstep loans)”
- FCA Handbook, “CONC 3.10 Financial promotions not in writing”
- legislation.gov.uk, “Consumer Credit Act 1974, section 49: Prohibition of canvassing debtor-creditor agreements off trade premises”
- legislation.gov.uk, “Consumer Credit Act 1974, section 48: Definition of canvassing off trade premises”
- Citizens Advice, “Loan sharks”