The Office of Fair Trading is considering referring the doorstep lending industry to the Competition Commission.

The OFT will consult the £2bn industry for five weeks before deciding whether to refer it to the commission, which investigates anti-competitive practices.

Four firms currently account for 70% of doorstep lending business.

The consultation follows an OFT investigation into doorstep lenders, prompted by a complaint from the National Consumer Council.

The investigation found:

  • customers of doorstep lenders may be in a poor bargaining position
  • their financial need may mean that they are not price-sensitive
  • customers may not compare loans and do not appear to do so
  • customers are tied into deals by “step up and roll over” loans where borrowers are offered a second loan while paying off a first loan
  • doorstep agents’ relationships with their customers mean they are unlikely to switch lenders.

Alan Thornton, campaigns officer at pressure group Debt on our Doorstep, said: “We are pleased with what they have found out about the home credit industry and we agree.

“We are hopeful that good things can come out of the five-week period before they refer the industry to the Competition Commission.”

OFT chairman John Vickers said: “The home credit industry meets a demand from consumers but our analysis of the NCC complaint has identified questions about the effectiveness of the competition.

“We will consult with the main parties in this sector on the case for a reference to the commission for fuller investigation.”