The OFT has a duty to protect the interests of consumers by ensuring the fitness of those holding or applying for consumer credit licences. It is required to prepare and publish guidance in relation to how it determines, or proposes to determine, whether persons are fit to hold a consumer credit licence. The OFT must have regard to its guidance in carrying out its functions.
The Consumer Credit Act 2006 introduced reforms, amending the Consumer Credit Act 1974 ('the Act'), which came into effect in April 2008. These included a new provision section 25 (2B) of the Act which made it explicit that amongst the business practices which the OFT may consider to be deceitful or oppressive or otherwise unfair or improper, for the purposes of considering fitness to hold a consumer credit licence, are practices that appear to the OFT to involve irresponsible lending.
The primary purpose of the OFT's irresponsible lending guidance (pdf 785kb) is to provide greater clarity for businesses and consumer representatives as to the business practices that the OFT considers constitute irresponsible lending practices. The guidance sets out the standards the OFT expects from businesses engaged in lending if they are to be considered fit to hold a licence. It covers the entire lending process from the initial lending decision up to the handling of arrears and defaults.
In line with our commitment to update the Irresponsible Lending Guidance as and when we consider it appropriate to do so, we have made a limited number of additions and amendments to the guidance document - primarily reflecting the end of the transitional period (from 1 February 2011) for giving effect to the Consumer Credit (EU Directive) Regulations 2010 which implement the requirements of the Consumer Credit Directive into UK law: download Irresponsible lending - OFT guidance for creditors (pdf 785kb). This version of the guidance supersedes that published on 27 August 2010.
In line with our commitment to update the Irresponsible Lending Guidance as and when we consider it appropriate to do so, we have made a limited number of additions and amendments to the guidance document. This version of the guidance superseded that published on 31 March 2010.
The document entitled Summary of responses to the consultation on 'Irresponsible Lending - OFT guidance for creditors' (pdf 795kb) summarises the main issues raised during the consultation process and provides the OFT view on those issues. It should be viewed as a companion to the Irresponsible Lending Guidance and it is, in effect, a 'frequently asked questions' document.
Irresponsible lending guidance published.
Irresponsible Lending Guidance - publication timetable
The OFT originally targeted the end of January/beginning of February 2010 to issue its irresponsible lending guidance, following a consideration of the consultation responses received. However, with a view to better co-ordinating with related initiatives being undertaken by colleagues at the Department for Business, Innovation & Skills (BIS) - and in order to be able to take account of such initiatives as the BIS review of the regulation of credit and store cards - we have taken the decision to postpone the publication of our irresponsible lending guidance until March 2010.
A summary of responses to the consultation will be published at or around the same time.
The OFT has launched a consultation on draft guidance setting out practices the OFT considers constitute irresponsible lending.
Download Irresponsible lending - OFT guidance for creditors consultation document (pdf 395kb)
The OFT has published a summary of responses to the consultation on the scope of its irresponsible lending project.
Download Irresponsible lending - Summary of responses to the OFT's scoping paper (pdf 119 kb).
See press release.
Download Irresponsible lending - a scoping paper (pdf 134 kb).
See press release.
Consumer Credit Directive
The Consumer Credit Act and regulations are changing as a result of implementation of the Consumer Credit Directive (CCD). Regulations were laid on 30 March 2010 and are due to come into force on 1 February 2011. It will however be open to firms to comply before then if they choose. Details can be found on the Department for Business, Innovation and Skills (BIS) website.
Relevant OFT guidance will be updated in due course in the light of the CCD changes.
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