A claim by the Competition Commission that doorstep credit companies have over-charged the mostly poor customers by £100 million a year over the past five years were fiercely disputed by lenders yesterday.
The Commission called on providers to introduce a series of measures to improve the way the sector worked, including helping people understand the cost of the loan they were taking out and making it easier for them to shop around.
But it warned that if these remedies were not successful it would consider imposing price caps on the market for a limited period while competition was improved.
The home credit market offers short-term, small loans, often of as little as £100, to people on low incomes. Repayments are collected in weekly or fortnightly instalments from people's homes.
But charges for the loans are high, with customers paying the equivalent of 177 per cent in annual interest charges on average, while some deals are reputed to cost 900 per cent.
There is also a lack of competition in the market, and while there are around 500 players, the sector is dominated by six large firms who account for 90 per cent of the market, with one lender, Friends Provident, accounting for more than half of it.
However, Anthony Coombs, managing director of S&U in Solihull, one of the companies named in the commission's report, rejected the estimate as "gratuitously inaccurate".
"This figure of £100 million is for the birds", he declared. "We will be having discussions with the Competition Commission on it.
"There are some very contentious issues on profitability - though they admit they have more work to do on this.
"I don't accept their figures. Our prices are the same as our competitors. If we are more profitable it is because we are more efficient."
Mr Coombs was less inclined to challenge other aspects of the report.
"The language is a bit tougher than we expected," he said. "On the other hand the actual remedies are what we anticipated.
"We are pleased that they recognise this as a valued service to customers and a service to people who at least in part would be financially excluded."
But he described objections to the size of rebates offered by lenders to customers who pay their loans off early as "very curious" because the Government had looked into this question only a year ago.
S &U's shares stayed unchanged yesterday at 625p and Mr Coombs said he doubted if the commission's proposals would have any effect on the company's financial performance.
"Our results are going to be more affected by the economic climate and the way we perform than any of this," he said.
But shares in S&U's larger rival, Provident Financial fell by 151/2p or 2.4 per cent to 633p. Those in Cattles, another leading competitor, fell less sharply, by 23/4p to 3763/4p
Provident noted that the commission's findings were provisional. No decisions had been taken and it now expects the inquiry to be concluded, later than scheduled, this autumn. Like S&U, it took issue with the commission's measures of profitability.
"We believe that the Competition Commission's approach to profitability is flawed," Provident stated. "We have produced expert evidence from Sir Bryan Carsberg (exboss of the Office of Fair Trading) and Professor Colin Mayer to support this view.
"Customers are not being over-charged for their home credit loans nor is the home credit sector making excessive profits."
Provident was pleased the commission recognised "the APR is an imperfect basis for comparison in this market".