Competition watchdog to scrutinise doorstep lenders

The Office of Fair Trading handed over its investigation of the doorstep lending market to the Competition Commission yesterday, saying it had uncovered sufficient evidence of anti-competitive practice to merit a more extensive inquiry.

The Office of Fair Trading handed over its investigation of the doorstep lending market to the Competition Commission yesterday, saying it had uncovered sufficient evidence of anti-competitive practice to merit a more extensive inquiry.

The move follows six months of consultation by the OFT, sparked by a "super-complaint" from the National Consumer Council in June. Super-complaints are those made by authorised consumer bodies, such as Which? and the NCC, which can legally oblige the OFT to investigate a sector.

The NCC demanded an inquiry after finding evidence that the small number of providers in the home credit market, and their high charges, were restricting competition and subsequently causing detriment to consumers. It argued that most of those who relied on doorstep lending had never shopped around for the best rates, adding that rollover and step-up loan deals often tied in customers to existing lenders.

John Vickers, the chairman of the OFT, said: "Our examination ... gives us reasonable grounds to suspect that there are features of this market which restrict competition. It is now for the Competition Commission to undertake a thorough investigation and, if necessary, to ensure that appropriate remedies are put in place."

Welcoming news of the OFT's referral, Deirdre Hutton, the chair of the NCC, said: "This will be the first official enquiry into the home credit industry - achieved as a result of the new super-complaint process. It is extremely good news for more than 2 million low-income consumers who - in the absence of more affordable cash loans - use home credit just to make ends meet."

But providers in the home credit market reacted angrily, arguing that there has never been a need for an inquiry. Robin Ashton, the chief executive of Provident Financial, one of the sector's largest providers, said: "The home credit sector is open, fair, fully regulated and increasingly competitive with highly transparent products and high customer satisfaction."

A statement from Cattles, another of the market's leading players, said: "We continue to be of the opinion that a further investigation is unnecessary."