DTI Research Slammed by International Expert
29th October 2004

The recent decision by the DTI not to introduce a limit on credit costs has been slammed as 'having no scientific basis' by an international expert on the subject from the Hamburg based Institute for Financial Services.

Professor Udo Reifner, perhaps the leading international authority on this issue, condemns the DTI Research into the operation of interest rate controls in other countries, in an open paper published by Debt on our Doorstep today.

The DTI research attempted to look into the practical experiences of controlling credit costs in France, Germany and many of the U.S states and was used by the Government to support its view that interest rate caps would lead to a restriction of credit availabiity. That view is now clearly based on false information about the French and German credit markets in particular.

Professor Reifner, whose institute was not consulted about the German market by DTI researchers, goes on record to say that conclusions made about the German system of interest rate control and its wider impact on credit availability are 'just not true'. His paper then lists 12 areas of inaccuracy in the DTI research and asks why it is that academics in the countries under study were not contacted at the time of the research? He concludes that the DTI report was 'obviously written by people with little knowledge about Germany' and 'without scientifc support..in the desire to justify policy measures in the UK only.'

Debt on our Doorstep had previously written to the DTI in June, urging them to check the findings of their research with consumer groups and academics in the countries subject to the study prior to publication - a request that continues to be ignored and which now seems to coming back to haunt them.

Further criticism of the DTI also appears likely from other countries. In the press release accompanying the Government's decision not to introduce an interest rate cap, the DTI claimed to have researched the position in Ireland and that there was evidence that controls there were restricting the availability of short term loans. A leading figure in the Irish Money Advice and Budgeting Service, a Governmental agency in Ireland, described to Debt on our Doorstep how he was 'hopping mad' at the claim which appears to have been based on a single interview with one money advice worker.

In the US meanwhile, Debt on our Doorstep is in discussion with the National Community Reinvestment Coalition to have the DTI paper distributed to consumer groups for discussion there. Initial reactions appear to confirm that statements made concerning the quality of the DTI research will come in for additional criticism over the next few months.

A full copy of Professor Refiner's paper is available here