Home credit costly for consumers

Britain's consumers are paying a "high price" for what they consider a satisfactory loan, according to a new report.

10:45 27 October 2005

Britain's consumers are paying a "high price" for what they consider a satisfactory loan, according to a new report.

The Competition Commission announced its findings as part of its inquiry into competition in the home credit market.

Although the watchdog found that consumers were generally satisfied with home credit, when loan repayments are collected from client's doorsteps, it suspects from its current evidence that the field suffers a lack of effective competition.

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."

Groups such as the National Consumer Council (NCC) have previously also claimed that the market is uncompetitive, since four firms take up 70 per cent of the market, leading to high interest rates, sometimes topping the 100 per cent mark.

Peter Tutton, social policy officer at Citizens' Advice Bureau (CAB), has said that the general picture of the sector, particularly in doorstep lending, is very complicated, and may not be as black and white as it appears.

Speaking to BBC Radio Five Live's 'Wake Up To money' programme, Mr Tutton said that CAB has seen a 100 per cent increase in the number of people coming in to talk about credit debt problems in the last ten years.

"It is a growing problem of people struggling to pay credit commitments," he said.

"'There is evidence of people coming to CAB that use home credit because they can't get credit anywhere else, but also of people who use home credit that can get credit elsewhere. So it is quite a complicated picture, and not very easy to untangle what is going on."

Today's report will chart the progress of the ten month industry probe, but will not make any final conclusions.

The final report will be issued next year.