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Press releases 2009 -

OFT publishes emerging evidence in credit review

140/09    8 December 2009

The OFT has today published a summary of research and emerging evidence from its high-cost credit review.

The summary includes the results of a consumer survey, initial results from behavioural economics research, a review of international policy approaches to high cost credit, and evidence on the impact of the recession on competition in the market.

The research showed that the majority of consumers understand what types of credit are 'high-cost', but a significant number - over a quarter for some products - said they were fairly or very dependent on high-cost credit in their day-to-day life. Consumers using high-cost credit said that the speed at which money could be accessed was the main reason they took out these loans.

There was limited evidence to show that those who access high-cost credit shop around for better offers or different products. Around one-third of consumers using high-cost credit would still use the product if repayments were a third higher.

The research found that information on the total repayment amount is more helpful than an APR in understanding the cost of short-term credit. The evidence showed that some consumers do not always understand APRs and may sometimes use them incorrectly when making comparisons between very different products.

The research looked at the variety of policy approaches taken in other countries to address concerns about high-cost credit. International case studies examined by the OFT and Europe Economics (a research consultancy) showed that simple interest rate caps have been circumvented by firms increasing their fees and charges, whilst caps that also limit charges can be circumvented through restructuring the transactions or cross-border lending.

The OFT is inviting comments on the research in order to test the completeness and robustness of the evidence it has gathered. It expects to issue a final report next year setting out conclusions and recommendations.


1. Read a summary of High-cost consumer credit -  emerging evidence from the review (pdf 396 kb). The full report and annexes are available on the Review of high-cost consumer credit page.

2. The review of high-cost credit was launched on 2 July 2009 (see press release 78-09).

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