Statement on OFT Response

Provident Financial PLC
10 September 2004



Provident Financial statement on OFT home credit consultation



Provident Financial notes the Office of Fair Trading's announcement today in
relation to its review of the whole of the home credit sector following the
super-complaint by the NCC.



Given the short time frame, 90 days for the OFT's initial response, and the
complexity of the market for the supply of small sum credit, Provident Financial
is not surprised that the OFT has decided to consult with the main parties in
this sector on the case for a reference to the Competition Commission.



In relation to the features identified by the OFT which may warrant further
investigation, Provident Financial believes:



  • Customers are increasingly price-sensitive and small sum credit providers
    compete vigorously for their custom.  72 per cent of Provident Financial
    customers have at least one other source of credit and 70 per cent say they
    have more credit options open to them than ever before



  • Home credit is among the most transparent forms of credit.  The full cost
    of the loan is set out up front and, in contrast with many other forms of
    lending, there are no hidden charges or penalties



  • Step up loans, where customers start with a small loan and may receive a
    larger loan if repayment has been satisfactory, are acknowledged by the OFT
    as 'a sensible way for lenders to minimise their own risk, and may also
    contribute to responsible lending.'  Step-up loans do not tie customers to
    existing lenders



•   Customers value the convenience, reliability and personal service
provided by agents who are paid on what they collect and not on what they lend.
Customers can and do switch to other providers



•   There are many examples of new entrants to the home credit sector and
growing competition in the wider small sum credit market.  Barriers to entry are
not high.



Provident Financial is pleased to note that the OFT recognised the many
attractive features of home credit.  In its response today the OFT said '
Customers seem to appreciate:  the convenience of borrowing from HC lenders who
are seen as friendly, understanding and helpful; the balance of flexibility and
discipline on repayments; the relatively low likelihood of being turned down;
the agreed end-date for repayments; the discouragement to over-borrowing from
lending only the amount requested or less; the relative lack of paperwork; and
the regular, reliable collection service.'



Robin Ashton, Chief Executive of Provident Financial, said: 'We will participate
fully in the OFT's consultation process.  We are pleased to note that the OFT
has recognised the many attractive features of home credit, part of an
increasingly competitive marketplace for small sum credit.'




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