Despite the negative reputation and poor publicity they suffer, doorstep lenders do serve a useful purpose for some people, an industry expert has said.
Chris Tapp, the associate director of Credit Action, said such lenders, like Provident Financial, fill a niche in the market because they provide loans for smaller amounts, under Â£5,000, which many traditional lenders will not touch due to the low profit margins.
He said: “I think the only reason mainstream lenders don’t go into doing that is because it has such a dubious reputation because people see the APR that is charged and it looks outrageous.”
Despite this, he said, such high-interest lenders gave an “invaluable” service because cheap alternatives like credit unions were not always available.
He also noted that the lack of automatic penalties and the personal touch of having door-to-door dealings with the companies has helped Provident gain “the highest customer satisfaction of any financial services company in the UK”.
Last month, Citizens Advice warned consumers looking to compare loans not to choose Provident because of the 177 per cent interest rates the company was charging.
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