According to Competition Commission, the £2 billion-a-year home credit market seems to be uncompetitive, though customers seem happy with the service they receive.
The commission's acting chairman, Peter Freeman said: "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".
Some of the institutions, such as Provident Financial, S&U, Cattles London Scottish Bank and so forth, use local agents to give loans to people at their doorstep at interest rates that go up to as high as 900% APR. These institutions have been accused of targetting poorer communities, where people have far too few options.
Following a "super-complaint" lodged by the National Consumer Council last year, the Office of Fair Trading (OFT) referred the home credit industry to the Competition Commission last December. The commission then began investigating the home credit industry, which gives loans to around 2 million customers.
In a document released by it, the commission says that this satisfaction, however, comes at a high price. one the results of these findings is that they "appear to point towards a lack of effective competition which may mean that home credit customers pay more than they should".
Six largest operators account for 85% of the market, though there are about 500 firms operating in the home credit market space.
These are just the preliminary findings. The final report of the commission will be published by mid-2006. If it can prove that the market is not operating fairly, changes could be demanded in working practices or firms can be forced to shut down parts of their businesses.
Claire Whyley, National Consumer Council felt: “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.”
Provident Financial, one of the major operators, begged to differ saying the sector was "increasingly competitive". This company controls about half of the UK's home credit market.
The Commission said it would delve deeper in a quest to unearth more information as to what is hindering the expansion in the market.
Posted
on : Fri, 28 Oct 2005 15:15 GMT | Loans News
By : Salim Patel
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