Here you'll find details on current regulatory issues. Competition Commission inquiry into home credit in the UK Consumer Credit Bill Consumer credit regulation - European Directive on Consumer Credit
In this section of the website, we will post information relating to the Competition Commission (CC) inquiry on home credit. On 20 December 2004, the Office of Fair Trading (OFT) announced that it was referring the UK home credit sector to the CC for inquiry. This followed a super-complaint launched by the National Consumer Council (NCC) in June 2004. The CC has indicated that the inquiry is now likely to be concluded by the autumn of 2006.
Provident Financial is giving its full co-operation to the CC. We have made a number of submissions in relation to the inquiry and we are continuing to offer every assistance to help provide the clearest picture of the home credit sector.
We do not support the OFT’s view of the UK home credit sector as portrayed in the OFT’s reasons for referral. We believe we can demonstrate the competitive nature of the market for small sum credit including a high degree of customer switching, low barriers to entry, increasing price competition and a high level of customer satisfaction.
The home credit sector is open, fair, competitive and fully regulated on an on-going basis. We are putting this case vigorously to the CC, and we hope this process will increase everyone’s understanding of the markets in which we operate.
The most recent publication on the home credit inquiry from the CC has been their Provisional Findings and Possible Remedies. At this latest stage in the CC process, no decisions have been taken. As the CC itself acknowledges, there are a number of areas where it has yet to conclude its thinking, including the “difficult and contentious” area of the approach to the measurement of profitability. We strongly disagree with the CC's methodology and conclusions regarding profitability, which forms the cornerstone of its Provisional Findings. We believe that the CC’s approach on profitability is flawed and we have produced expert evidence from Sir Bryan Carsberg and Professor Colin Mayer to support this view. Customers are not being over-charged for their home credit loans nor is the home credit sector making excessive profits. We will continue to engage with the CC on this topic.
Provident Financial is pleased that the CC’s own research confirmed high levels of satisfaction among customers who find home credit products well suited to their needs. The CC has recognised evidence of innovation within the industry, that the relationship between customers and agents is appropriate and that customers value the service they receive. We are also pleased to note that the CC recognises that “the APR is an imperfect basis for comparison in this market” and that "the home credit product in its current form fulfils an important role for a significant number of customers".
We will work constructively with the CC on the Possible Remedies they have identified: increased data sharing; better price information; provision of regular statements; the provision of comparable products; relaxation of the rules on canvassing new customers, and increasing the amount of the early settlement rebate. We will aim to ensure that any remedies are in the best interests of our customers.
We share the CC’s reluctance to pursue price caps. We do not believe they work in the interests of consumers. Rather, they can harm those that they are supposed to protect, as most recently highlighted by the Review by the Department of Trade and Industry in 2004. Indeed the NCC, sponsor of the original super-complaint that led to the CC inquiry, agrees with us on this point.
Further discussions and a thorough consultation with the CC with regard to Possible Remedies are underway.
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The Consumer Credit Bill received Royal Assent on 30 March 2006. The Bill follows a parliamentary review of the 1974 Consumer Credit Act and aims to ensure that the UK consumer credit market operates in the interests of consumers in a 'fair, clear and competitive' way.
We welcome the Bill as a way of modernizing the regulation of consumer credit, protecting the consumer and introducing greater fairness and transparency.
The UK’s Consumer Credit Act implements the European Directive on Consumer Credit.
The European Commission is currently consulting on its proposals to modernise the Directive. The proposals are designed to improve transparency on consumer credit products and allow easier comparison across the EU.
The EU Consumer Credit Directive is proceeding through its various legislative stages. We continue to monitor events and to actively lobby to ensure that home credit receives fair treatment in any eventual outcome.
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