No Competition, the case for a cap...
4th June 2003

Lack of competition on price bolsters case for market intervention

The case for a cap on credit charges was spelt out by Debt on our Doorstep at a seminar hosted by Royal Bank of Scotland last month and is now being considered by officials at the DTI and the Treasury. Focusing on the absence of competition in the non-standard loans market, we ask Government to consider:

• The lack of awareness of the total cost for credit amongst low income borrowers;
• Borrowers inability to "switch" lenders due to a lack of shared credit reference information;
• The lack of new market entrants - 71% of the home credit market is controlled by just 4 firms;
• The fact that the price for credit is higher than the actual risks to the lender warrant;
• The lack of competition on price.

The paper detailing our initial case for a cap is now available from our Policy pages, but in the meantime we are looking for evidence to support a potential super-complaint to the Office of Fair Trading, which would require them to conduct an investigation into the market and make recommendations for change - which could include introducing a price cap on the total cost for credit. If you want to help then join our network and drop us a line.