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CC publishes proposed remedies

The Competition Commission has published its proposed remedies designed to increase competition in the home credit market.

In its provisional findings report published in April, the CC 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.

Along with the report, the CC also outlined a number of possible remedies to
increase competition in the market. Since then the CC has been discussing
those possible remedies with home credit companies and other lenders as well as consumer bodies, credit reference agencies and other arms of government.

Following these discussions, the CC is now proposing a package of measures
which it considers will be practical and effective in increasing competition
in the market to the benefit of customers.

The proposed remedies have been published so that interested parties have a
further opportunity to comment before the CC publishes its report (currently
planned for October). This report will include the decision on the remedy
measures to be introduced.

The proposed package of remedies comprises:

* Obliging large home credit lenders to share data on customers’ payment
records-to encourage price competition by reducing the advantage enjoyed by existing lenders-and to allow customers to demonstrate information about
their creditworthiness to lenders.

* Obliging all home credit lenders to provide better price information-to
increase customers’ sensitivity to prices (by enabling them to make
comparisons between loans) and stimulate price competition between
providers.

* Statements to provide clear standardized information to customers on their
loans and also to assist them in demonstrating creditworthiness to lenders.

* Increasing the early settlement rebate-to reduce the price paid by
customers when they repay their loans early.

* Recommending to the DTI a remodelling of the restrictions on canvassing-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’.

The CC is still considering the use of a price cap in the event of
significant obstacles arising in the implementation of its preferred
remedies. It will take into consideration the various representations
already received, or to be received during the consultation now beginning,
on the possible effect of any price caps.

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