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Last Updated: Thursday, 27 October 2005, 07:28 GMT 08:28 UK
'High price' of doorstep lending
Debt signpost
Doorstep lenders often provide small cash loans
Consumers pay a "high price" for the convenience of home credit, according to the Competition Commission.

Its comments came in a document which is part of its inquiry into whether the home credit market is uncompetitive.

The commission said it found consumers were generally happy with home credit, whereby repayments on loans are collected from the customer's home.

However, the commission noted that there may be a lack of competition in the market.

We hope it [the report] will lead to practical action and a fairer deal for Britain's two million poorest people who use home credit to make ends meet
Claire Whyley, National Consumer Council

"From the evidence so far it appears that home credit customers obtain the loans they need with repayment arrangements that suit them - but pay a high price for doing so," said the commission's acting chairman, Peter Freeman.

"The home credit industry seems to us to provide a service which meets its customers' requirements," he added.

"Various factors, however, appear to point towards a lack of effective competition which may mean that home credit customers pay more than they should."

The commission will issue its final report into the industry next year

Low income customers

The Office of Fair Trading (OFT) referred the home credit industry to the Competition Commission last December.

Many of the people targeted by door-to-door lenders are on low incomes, sometimes with poor credit histories, and may have been refused credit by mainstream High Street lenders.

The National Consumer Council (NCC), which lodged a "super-complaint" in June 2004 that ultimately led to the commission's inquiry, found that most customers did not shop around, instead developing a special relationship with these doorstep lenders.

The NCC said the Competition Commission had got its analysis of the home credit market "spot on."

A lone parent
I knew it was expensive - 25 a week over 20 weeks - but what do you do when your washing machine is broken and you have a young family?

"We are particularly pleased at the consumer-focused approach of this inquiry," said Claire Whyley, NCC deputy director.

"We hope it will lead to practical action and a fairer deal for Britain's two million poorest people who use home credit to make ends meet," she added.

The bulk of the home credit market is in the hands of four providers, and the NCC has argued that this makes the market uncompetitive and allows high interest rates to be charged.

Provident Financial, which controls about half of the UK's home credit market, said the sector was "increasingly competitive", with high levels of customer satisfaction and low barriers to entry.

The firm added that it was too early to draw conclusions from the commission's interim report.

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