28 April 2006
Home credit customers are being seriously overcharged for the loans they take out, according to the initial findings of an official report.
The Competition Commission said that a lack of competition in the home credit market was causing consumers to face higher prices for the loans.
It described the extent of the overcharging as "substantial", estimating that it could have amounted to over £100 million a year over each of the past five years.
That suggests each home credit customer could be paying £25 too much for an average-sized loan.
Peter Freeman, chairman of the commission, said: "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.
"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: "Other credit products, ranging from credit cards and personal loans through to mail order, pawnbroking and credit unions, do not act as any constraint on prices."
Compare secured loans and find the best secured loan for you with the uSwitch.com loans comparison service
© 2008 Adfero Ltd
Content for the uSwitch.com market news service is provided by a third party, Adfero Ltd. Whilst uSwitch.com makes reasonable efforts to check the reliability of this content, uSwitch.com does not guarantee the accuracy thereof or endorse the views or opinions given by Adfero Ltd, unless expressly stated otherwise.