The high cost credit section is made of up pay day loans, door step lenders, pawnbroking and rent to buy credit markets. The products offered by such lenders are typically used by people on low incomes who cannot access mainstream credit that wants to borrow small amounts of money for a short period.

The following is an extract from the OFT press release.

Specifically, the review found that:

• many consumers are unaware of the options open to them and advice is limited
• consumers tend to focus on how quickly and easily they can access credit and the affordability of the repayments rather than the total cost compared to other products, and
• there have been few significant entrants to these markets recently, competition on price is mostly absent in some high-cost credit markets, and some of the incumbent suppliers appear to be earning high profits.

The report makes a number of recommendations for improvements to the way in which these markets operate, while recognising that these will have only a limited impact in the current context. They include:

• measures to help consumers make informed decisions and increase their ability to develop a documented credit history
• the promotion of best practice among suppliers with an industry-wide code of practice, and
• the Government working with industry groups to make information on high-cost credit loans available on price comparison sites, and ensuring that financial literacy programmes cover high-cost credit products.

The recommendations included in this report are also intended to assist the Government in considering its approach to the challenging high-cost credit sector. The report makes it clear that these findings and recommendations do not have wider applicability than the high-cost credit sector the OFT examined in this review.

Ray Watson, OFT Director of the Credit Group said:

'Our report has found that people who use high-cost credit have limited options and find it difficult to exercise what choice they have to obtain the best deal. This means that competition between suppliers is less effective than it might be. The recommendations we're making today would deliver worthwhile improvements to these markets but more radical approaches, outside the remit of the OFT, need to be examined by the Government if the fundamental and longstanding issues of lack of consumer power and limited supply are to be tackled.'

Advice4debtNI welcomes any improvements to the high cost credit sector as debts from such lenders can quickly spiral out of control and increase financial difficulties.