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Aug 23, 2006
The UK’s Competition Commission (CC)
has proposed several strategies designed to increase competition in the home
credit market. The proposed package of remedies are as follows:
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Obliging all home
credit lenders to provide better price information
– CC says this will increase customers’ sensitivity to prices (by enabling them
to make comparisons between loans) and stimulate price competition between
providers.
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Statements
– This is needed to provide clear standardized information to customers on
their loans and to assist them in demonstrating creditworthiness to lenders.
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Increasing the early
settlement rebate – CC thinks this will reduce the price
paid by customers when they repay their loans early.
§
Recommending to the
DTI a remodeling of the restrictions on canvassing
– This is designed to improve the ability of other companies to compete with
existing lenders via a limited relaxation of the current restrictions requiring
written consent for a home credit provider to visit while still maintaining the
prohibition on ‘cold calling’.
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Obliging large home
credit lenders to share data on customers’ payment records
- This is expected to encourage price competition by reducing the advantage
enjoyed by existing lenders and to allow customers to demonstrate information
about their creditworthiness to lenders.
This announcement came following the CC’s
release of its provisional findings report in April, where the commission
concluded that the lack of competition in the home credit market, from other
credit products, new entrants or among the home credit providers themselves,
means that customers face higher prices for their loans than would be expected
in a competitive market.
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