Office of Fair Trading
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OFT launches consultation on irresponsible lending

OFT launches consultation on irresponsible lending

OFFICE OF FAIR TRADING News Release (91/08) issued by The Government News Network on 1 August 2008

The OFT has today launched a public consultation on the scope of its project looking at irresponsible lending in UK consumer credit markets.
The consultation follows major changes to the Consumer Credit Act, which include the identification of irresponsible lending as a matter to which the OFT must have regard when it considers businesses' fitness to hold a consumer credit licence.

The OFT's irresponsible lending project, of which this consultation is the first stage, will involve wide consultation with business, consumer groups and other stakeholders. One of the key outcomes of the project is expected to be clear guidance on lending behaviours and practices which the OFT considers to be irresponsible.

The study will consider all forms of consumer credit lending which the OFT licences and all participants in the market, including lenders, brokers and other intermediaries.

The initial phase of this project involves full consultation to define the range and nature of the project. The issues the review could consider include the advertising and marketing of products, selling techniques, product design, use of credit scoring techniques, appropriateness of products to borrowers, sale of associated products and management of consumers' accounts including handling of defaults and arrears.

Ray Watson, OFT Director of Consumer Credit, said:

'Credit is an important part of everyday life so it is vitally important that consumers are safeguarded from irresponsible lending and that businesses have clarity about what this constitutes. The OFT looks forward to hearing from a wide range of businesses, consumers and representative bodies on these issues.'

The OFT will be contacting key stakeholders directly. Full details of how to contribute to the consultation can be found on the OFT website at


1. The Consumer Credit Act 1974 requires businesses that offer goods or services on credit or lend money or are involved in activities relating to credit or hire to be licensed by the OFT.

2. The Consumer Credit Act 2006 which came into force in April 2008 sets out a new framework and responsibilities for the OFT in administering the consumer credit licensing regime. Among a number of important changes, the Act introduces two concepts which have a particular bearing on the issue of responsibility in lending. These are the consideration of credit competence in the assessment of fitness and the explicit identification of evidence of irresponsible lending as an unfair business practice. Both elements may be taken into account by the OFT when assessing the fitness of licensees and applicants to hold a credit licence. See press release 45/08.

3. The OFT has previously provided some clarification on what constitutes irresponsible lending in its general fitness guidance (OFT 969) and there is pre-existing guidance, particularly that available in the OFT's Non-Status Lending Guidelines issued in 1997.

4. The OFT can refuse or revoke a licence if it decides that a trader is not fit to hold such a licence.

5. There are approximately 120,000 consumer credit licence holders in the UK.

PUBLIC enquiries: 0845 7224499
OFT reports and consumer information leaflets are available free from:
OFT, PO Box 366, Hayes UB3 1XB 0800 389 3158

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