The OFT estimates that the size of the high cost credit sector is up to £35bn annually. The focus is the market for loans, often of small amounts, repayable over short periods and with high APRs. It said customers in this sector have limited access to credit and so are a vulnerable group.

It will look at the level and nature of competition in the sector, including the impact of the economic downturn on competition and whether suppliers compete vigorously in a way which delivers benefits to consumers. This follows the withdrawal from the market of sub-prime lenders Cattles and London Scottish Bank during the credit crisis.

The OFT will also consider the business models of lenders within the sector; the behaviour and decisions made by consumers when purchasing credit; and whether consumers have the appropriate level of protection and are given the information they need to make well-judged decisions.

The review will draw on information from the credit industry, consumer organisations, other parts of government and independent experts. It will also examine credit and lending practices in other countries. The OFT expects to publish interim findings by the end of 2009 and the final report in spring 2010.

The OFT review follows a review of the home credit market by the Competition Commission in 2006. It proposed remedies such as data sharing for home credit providers and various measures to help consumers shop around. Customers who borrow from doorstep lenders are often extremely loyal to the model, which offers them credit when other lenders refuse to engage with them.

John Fingleton, OFT chief executive, said: "Low income consumers struggle to access credit and frequently have to resort to expensive, high interest options, and this has increasingly been an issue during the economic downturn. These consumers are vulnerable to exploitation. This study will look at the way this sector works to examine whether they get a fair deal, and whether outcomes in the market might be improved."

Source: Credit Today