A lack of competition in the home credit market means customers are being overcharged to the tune of £100m, competition watchdogs have found.
Consumers are paying a high price for doorstep loans, the report says
The Competition Commission estimated that customers pay 9% too much for loans from doorstep lenders.
It called on lenders to provide better information on prices and share information with other lenders to make it easier for customers to shop around.
It warned that it may impose price caps if these solutions were unsuccessful.
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.
"Customers value home credit because it suits their needs very well but the fact is that they are paying too much for it, because of the lack of competitive pressure in the market," said Competition Commission chairman Peter Freeman.
"Price competition between the existing lenders is weak, partly because customers seem insensitive to prices, given the greater value they place on factors such as the convenience of the loan and the difficulty in comparing prices between companies."
Six large lenders account for 90% of the market, with one lender, Provident Financial, accounting for more than half of the £2bn industry.
The report also found that over the past five years there had barely been any fall in charges - resulting in lenders making £500m in excess profits.
In addition, few customers had switched lenders, the commission found, partly because lenders with an existing relationship with a customer had a major advantage over other firms as they had more knowledge of the client's circumstances.
The OFT investigation was sparked by a super-complaint lodged by the National Consumer Council (NCC).