Spotlight on credit search system

The committee heard evidence in late October

An investigation into whether consumers are being penalised for shopping around for loans has been recommended by a committee of MPs.

The report by the Treasury Committee failed to give any strong indication as to whether any changes should be made in the market.

Consumer groups argue that multiple searches affect the rates that people might be charged.

But providers said information was shared between lenders to stop fraud.

Hearing

The committee heard evidence in late October that shopping around for loans could affect people's credit ratings.

This meant some missed out on credit or were put off shopping around.

However, the committee reported that it had not been given "overwhelming evidence that it is a major source of direct consumer detriment".

But it had also not been presented with "unequivocal evidence" that credit searches were essential for loan providers.

The committee called on the Office of Fair Trading to investigate the market, and for the Information Commissioner to look into whether the £2 fee charged to people who wanted to access their credit file was reasonable.

Fiona Hoyle, head of consumer finance at the Finance and Leasing Association, said: "We are pleased that the committee's report recognises that a balance has to be struck between preventing fraud and allowing consumers to shop around.

"Credit is in any case not refused on the basis of the number of credit searches alone."

But Toby Van Der Meer, of Moneysupermarket.com, who gave evidence at the hearing, said: "This issue particularly hits low income groups hard with six out of 10 low income consumers not understanding how the system works."