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OFT to review high cost consumer credit sector

OFT to review high cost consumer credit sector

Category: Loans

Updated: 02/07/2009
First Published: 02/07/2009

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The Office of Fair Trading (OFT) is to launch a review into the supply of high cost consumer credit sector, which the body estimates could be worth as much as £35 billion annually.

The OFT says the sector is characterised by loans which are often small amounts that are obliged to be repaid over short periods of time, often with high APRs. Furthermore, many of the people who take up such products are low earning and financially vulnerable.

The review is to focus on: the level and nature of competition in the sector, including the impact of the economic downturn on competition and whether suppliers compete vigorously in a way which delivers benefits to customers; the business models of lenders in the sector; and the behaviour and decisions made by consumers when purchasing credit.

It will also look at whether consumers have the appropriate level of protection and are given information they need to make well judged decisions.

Information will be drawn from the credit sector, consumer organisations, parts of government and independent experts, and will encompass lending practices abroad.

The announcement of the review comes on the day the Government announced it is to ban credit card cheques as part of its plans to protect susceptible consumers, on which the OFT worked closely with The Department for Business, Innovation and Skills.

"Low income consumers struggle to access credit and frequently have to resort to expensive, high interest options, and this has increasingly been an issue during the economic downturn," said John Fingleton, OFT chief executive.

"These consumers are vulnerable to exploitation," he continued. "This study will look at the way this sector works to examine whether they get a fair deal, and whether outcomes in the market might be improved."

The OFT is expected to publish interim findings by the end of the year, with the final report due in spring 2010.

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