‘High cost’ for home credit customers

Customers are generally happy with home credit loans, but they pay a “high price”, the Competition Commission (CC) has warned.

The Commission said that there might be a lack of effective competition in the home credit market, where instalments are collected from customers’ homes.

The investigation was sparked last year by a ‘super complaint’ from the National Consumer Council, which was concerned about high interest charges and lack of information on costs and alternatives in the home credit market.

Many customers who turn to home credit are often on low incomes and have had difficulty obtaining credit by other means.

The CC found that there was “little or no evidence” of price falls in home credit in recent years, in spite of reported competition from others forms and providers of credit, and little evidence of price competition between providers, which did not encourage customers to switch or seek better deals.

However, the CC inquiry also found that many home credit customers like having their payments collected regularly at their home and valued their relationship with their agent.

The CC’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.

"The home credit industry seems to us to provide a service which meets its customers' requirements. Various factors, however, appear to point towards a lack of effective competition, which may mean that home credit customers pay more than they should.

"We haven't reached any conclusions in this inquiry and this document sets out only our preliminary thoughts based on the evidence so far. We will now look to discuss these with all the interested parties to find out if competition is working effectively in this market and whether customers are benefiting as a result."

The National Consumer Council welcomed the CC’s report, describing it as “extremely positive and encouraging”.

Claire Whyley, NCC deputy director of policy, said: “The Competition Commission has got it spot on by describing home credit as coming at a high cost for customers. We are particularly pleased at the consumer-focused approach of this inquiry. 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.’

(KMcA/SP)