DOORSTEP lenders faced calls to cut their rates yesterday after they were accused of having overcharged low-income consumers by £500 million in the past five years.

The Competition Commission highlighted data which it said showed that borrowers were being overcharged £9 for every £100 of debt taken on.

Doorstep lenders typically charged an annual percentage rate (APR) of 177 per cent on loans of between £100 and £500, it said.

The watchdog demanded that the £2 billion doorstep- lending industry share customer information with credit reference agencies to improve competition in the market.

In a provisional report on the industry, the Commission said that access to customer details would enable high street banks to offer borrowers personal loans and credit cards, attracting new lenders to the home credit market. High street lenders do not currently have records on borrowers that use doorstep lenders.

The claim of £500 million of overcharging prompted a parliamentary committee to give warning that the lenders could face sanctions. Mark Lazarowicz, the Labour chairman of the All-Party Parliamentary Group on Debt and Personal Finance, urged ministers to consider forcinglenders to recompense borrowers.

He said: “It would be scandalous if the customers of the doorstep lenders are forced to wait still longer for a cut in the interest rates that they are charged as a result of delaying tactics by some in the industry.

“If the doorstep lenders do not put their own house in order quickly and comprehensively, then I would call upon the Department of Trade and Industry to use the powers open to them under the new Consumer Credit Act to make them do so.”

Under the Competition Commission’s proposals, Provident Financial, Cattles, S&U, London Scottish Bank, Park Direct and Mutual Clothing & Supply — which together control about 85 per cent of the home credit market — would pool data on customers’ repayment histories with Experian and Equifax, the two leading credit- reference agencies.

John Harnett, finance director at Provident, which has about half the market, backed theinitiative. “Customers who pay well on their product will show up and it will make them more attractive,” he said.

The Commission identified a series of industry reforms, which include the provision of regular statements to customers and information on products from rival lenders; allowing doorstep lenders to canvass borrowers of rival lenders at their homes; and increasing the size of the rebate that borrowers obtain for repaying a loan early.

The watchdog is expected to complete its two-year investigation into the home credit industry this autumn.

The National Consumer Council (NCC) initiated the Commission’s investigation after calling for regulatory action against doorstep lenders in 2004.

Claire Whyley, deputy director of policy at the NCC, said: “The NCC particularly welcomes its plans to oblige lenders to share information on customers’ payment records and to give customers a fairer deal when they pay off their loans early.”

PAYING THE PRICE

Doorstep borrowers collectively make overpayments of £100 million a year.