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 http://www.oft.gov.uk
NOTES
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.
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