Doorstep lenders charging £100m 'too much'
People taking out small loans from doorstep lenders are paying too much, the Competition Commission has said today.
Customers are being charged, on average, nine per cent more than they should be because of a lack of competition in the market, the commission says in its provisional report.
This means that in the last five years Britons have paid some £100 million too much for their loans, and this affects the poorest sections of society the most.
Customers of doorstep loans are more likely to be young mothers, living in social housing, and on low incomes, the Competition Commission reveals.
However, the products were given some praise, as they provide easy access to credit that many of these customers would not have elsewhere.
"Customers value home credit because it suits their needs very well but the fact is that they are paying too much for it, because of the lack of competitive pressure in the market," said Peter Freeman, chairman of the Competition Commission.
"Price competition between the existing lenders is weak, partly because customers seem insensitive to prices, given the greater value they place on factors such as the convenience of the loan and the difficulty in comparing prices between companies."
He added: "The result is that customers are paying too much. The analysis of this has been a very difficult and contentious area of our inquiry and our discussions with lenders are continuing, but our best estimate is that, on average, borrowers are paying up to £9 more in charges for every £100 they borrow than would be the case if the market were competitive."
The findings are currently provisional, and the commission will talk them through with lenders before reaching a final conclusion later in the year.
However, if talks do not go well, it could impose price caps on firms.
"We are now consulting on a number of remedies designed to help increase competition in this market and benefit customers before we publish our final report in the summer," Mr Freeman said.
"However, we remain conscious of the importance of this product to its many customers and our remedies will take into account the need for this service to continue whilst seeking to increase competition."
The typical size of a doorstep loan is £300, with 2.3 million people taking out such a loan in 2004 at a cost of £1.9 billion.
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