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Home credit

Name of complainant: National Consumer Council

Date of complaint: 14 June 2004

Subject of complaint

The National Consumer Council (NCC) has asked the OFT to look at concerns in the home credit (HC) sector. The NCC stated that it does not believe that the HC market is working well. The NCC highlighted the following features about which it had concerns:

  • little evidence of switching by HC customers, either to different HC suppliers or to other products and providers
  • significant switching costs for HC customers if they wish to change HC supplier
  • information asymmetries which make it difficult for HC consumers accurately to assess the costs of HC or compare them with other types of credit
  • high market concentration which may reduce consumer choice and limit the extent of competition
  • barriers to entry which reduce the likelihood of new lenders joining the market
  •  high prices.

OFT response: 10 September 2004

The OFT propose to consult on a market investigation reference to the Competition Commission (CC). The OFT Board will decide whether or not to make a reference following the consultation.

The OFT has identified features of the market for home credit which appear to restrict competition, and which may warrant further investigation by the CC. These are that:

  • many HC customers are in a poor bargaining position and their financial need may mean that they are not price-sensitive
  • customers may have difficulty comparing loans and do not appear actively to do so
  • step-up and 'roll-over' loans tend to tie customers in to existing lenders
  • agents' relationships with customers contribute to making them unlikely to switch lenders
  • aspects of the structure of the market may deter entry, particularly on a significant scale.

Action following response

OFT referred the supply of home credit to the Competition Commission for further investigation.

Key documents




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