Two years after the Competition Commission - Provident's business is booming

In our joint statement on the credit crunch, published with the European Coalition for Responsible Credit in October last year, we drew attention to the risk that, as mainstream lenders struggled with liquidity, they would start to restrict access to credit and leave more and more people at the mercy of high cost lenders such as those engaged in Payday lending and Home Credit.

Unfortunately, a recent article in the Scotsman confirms this view. 2 million people are now forced to obtain credit from doorstep lender Provident, and in their own words they accept that they benefit from restrictions on lending in the mainstream market. The associated problem, of course, is that this lack of competition from mainstream lenders means that Provident can also get away with charging sky high rates.

The credit crunch also means that many of the Competition Commission recommendations will be of little, or no effect. For example, the Commission's attempts to encourage data sharing - so that home credit borrowers could build up an improved credit score and apply for mainstream credit at cheaper rates - appear very flimsy when mainstream lenders are restricting access to all but those with the very cleanest of credit scores. Policy makers have so far been pre-occupied with the impacts of the crunch on mortgage rates - perhaps now they should start to think about the impacts on child poverty instead.

----------- Article from The Scotsman 5th March 2008 -------------------


2 million pay 100% interest on doorstep

By SHÂN ROSS

A RECORD two million Britons have borrowed money at interest rates of up to 100 per cent from Britain's biggest doorstep lender after being refused credit by high- street banks, it was revealed yesterday.

Provident Financial, which sells small loans door-to-door, said profits were up 11 per cent to £115 million. Since last year's meltdown in the US subprime mortgage market, British mainstream banks have introduced stricter rules on who they will lend to, boosting business for doorstep lenders.

Provident's home credit business, which employs almost 12,000 collection agents to make 80 million home visits a year, saw its customers increase by almost five per cent to a record 1.6 million last year.It has a large customer base in Scotland, where it provides credit to 227,086 people and has 1,772 agents. Peter Crook, the chief executive of Provident Financial, said:

"Current market conditions are favourable for us, as mainstream banks continue to tighten their lending criteria."