Britain's competition watchdog yesterday stopped short of imposing price caps on door-to-door lenders despite accusing them of making £75m in excess profits at the expense of the poor.
The Competition Commission's move provoked anger among organisations dealing with low-income groups. According to the Commission, interest rates on door-to-door loans can reach 300 per cent for advances lasting six months, and 100 per cent for a year.
David Orr, chief executive of the National Housing Federation, which represents English housing associations, said low-income groups needed more protection.
He said: "We've been campaigning against the extortionate practices of doorstep lenders because they prey on housing association tenants, who will be hit especially hard in the run-up to Christmas. The Commission has already found that doorstep lenders are overcharging customers by as much as £25 for an average £300 loan. It's ridiculous that these companies can name their price when lending to the poorest families and needs to stop."
Mr Orr said price caps "operate successfully in Europe" and would do here. The Commission, however, said it was worried that price caps could limit the availability of credit to low-income groups. It believed the range of measures adopted yesterday would improve competition, leading to lower prices.
They include forcing lenders to share data on customers' payment records, to help new lenders enter the market and compete effectively. Lenders will also be required to publish prices on a website where customers can compare different providers. Customers who repay early will have to receive a "fair" rebate.
The proposals were first mooted in August and yesterday's final report follows a near two-year investigation sparked by a so-called "super complaint" from the National Consumer Council.
The stock market-listed Provident Financial controls 60 per cent of the £2bn-a-year market, with a further 30 per cent held by just five other lenders. The company rejected the claims on excess profits, preferring the views of Sir Bryan Carsberg and Professor Colin Mayer who presented evidence that was "consistent with Provident Financial's position".
"Provident Financial will continue to work constructively with the CC to implement the remedies, the majority of which are due to be in place by the end of 2007," the company said.
The National Consumer Council, which raised the issue as a "super complaint", called the Commission's final verdict an "excellent result" for Britain's two million home credit customers.
Ed Mayo, its chief executive, said: "They have been paying £75m over the odds every year for these small cash loans collected at home. But the Competition Commission's remedies must be accompanied by efforts to increase the range of affordable credit choices for people on low incomes. Reforms to the Government's social fund and more voluntary sector credit initiatives would make a big contribution."
Shares in Provident Financial finished the day down 3p at642p.Reuse content