Friday, December 01, 2006

New Rules For Home Credit

The Competition Commission yesterday unveiled a number of measures, designed to increase competition and lower prices in the home credit market. It did not impose price caps on home credit lenders.

The new measures force lenders to share data on their customers' payment records, and require them to publish their prices on a website so that borrowers can make more informed choices.

Home credit lenders, which include Provident Financial PLC and Cattles PLC, will also be obliged to give rebates to customers who repay their loans early.

However, the competition watchdog said that it had no plans to impose a ceiling on the repayment rates that lenders can charge. It argued that a rate cap might make home credit unavailable to the most vulnerable customers.

Competition Commission chairman, Peter Freeman, said:

"These measures are designed to open up the market to greater competition so that customers will get more choice and lower prices."

Provident Financial said that it would "work constructively" with the Commission to implement the new measures.


"Provident Financial is pleased that the CC's own research confirms high levels of satisfaction among customers who find home credit products well suited to their needs."

Damon Gibbons, chair of campaign group Debt On Our Doorstep, said:

"The measures proposed in this report will probably take a further 18 months to impact on the price of credit.

In that time, lenders will have made another £100M in excess profits. Low income borrowers will wonder why it is that the industry isn't being forced to pay that amount as a levy to fund affordable credit provision such as credit unions, or why interest rates aren't being reduced through a cap immediately to ensure they get a fair price.

The financial services industry is much like a balloon filled with water, when it is squeezed by rules and regulations in one direction it produces a "swelling" of new charges and fees in another.

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