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Last Updated: Thursday, 30 November 2006, 08:06 GMT
Home credit firms face shake-up
A wallet
Consumers are paying a high price for doorstep loans, the report says
Home credit lenders have been told by the Competition Commission that they must provide clearer information to consumers about loan costs.

Lenders must also share information with other firms and make it easier for customers to shop around.

Rebates should be available to customers who settle their loan accounts early, the watchdog said.

The two-year Competition Commission probe found that in total customers were being overcharged by nearly 100m.

These measures are designed to open up the market to greater competition so that customers will get more choice and lower prices
Peter Freeman, Competition Commission

The package of industry reforms include:

  • Lenders to share data on customers' payment records

  • Lenders to publish prices on a website where customers can compare the prices of loans on offer

  • Borrowers to be provided with clear comprehensive account statements

  • Ensure that those customers who repay loans early (around a third of all customers) get a fair rebate.

"These measures are designed to open up the market to greater competition so that customers will get more choice and lower prices," Peter Freeman, Competition Commission chairman said.

"We have focused on the obstacles that restrict competition and raise prices in this market, such as the advantage existing lenders have in knowing their customers' creditworthiness."


Six large lenders account for 90% of the market, with one lender, Provident Financial, accounting for more than half of the 2bn industry.

The Commission's investigation was prompted by a super-complaint from the National Consumer Council (NCC).

Consumer groups have long criticised the home credit market as both expensive and lacking competition.

Home credit lenders offer short-term, small loans to people on low incomes, collecting repayments weekly or fortnightly with collectors calling at customer's homes.

Interest rates are often high, sometimes in excess of 100% annual percentage rate (APR).

This is an excellent result for Britain's two million poorest
Ed Mayo, National Consumer Council

But lenders argue that they have to shoulder major costs and often lend to people that mainstream banks consider too high risk.

The Commission, however, ruled out imposing price caps on the industry.

The Commission said that: "despite its high cost, home credit is much valued by many customers and we would not be helping these people if we made home credit less available."

New obligations

In response, Ed Mayo chair of the NCC welcomed the Competition Commissions proposed reforms.

'This is an excellent result for Britain's two million poorest," Mr Mayo said.

"The new obligations on doorstep lenders should inject more competition into this market and bring down the cost to hard-pressed consumers," he added.

Provident Financial, the leading firm in the sector, said it was "pleased" that the Competition Commission had found "high levels of satisfaction amongst customers."

Have you taken a loan from a Home Credit lender? Was the information provided to you clear and honest? What was your experience? Are you a lender? Will the reforms make a difference?

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