Irresponsible lending consultation response published

147/08 19 December 2008

The OFT has today 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 consultation (pdf 119 kb).

After taking stakeholders' views into account, the OFT has decided to examine issues including advertising and marketing, selling techniques, product design, use of appropriate credit scoring techniques, and handling of defaults or arrears as well as behaviour and practices around a borrower's ability to repay credit. This is the wider scope proposed in the scoping paper.

The OFT will continue to work with stakeholders during the next stage of the project with a view to issuing draft guidance for consultation in the spring and publishing final guidance in the summer of 2009.

There were 58 responses to the consultation, of which 34 agreed with the proposed wide scope of the project. Respondents included consumer organisations, industry associations, regulators, and individual businesses.

The consultation on scope was launched on 1 August 2008, following changes to the Consumer Credit Act. These changes included the identification of irresponsible lending as a matter to which the OFT must have regard to when it considers businesses' fitness to hold a consumer credit licence.

NOTES

1. Download Irresponsible lending - a scoping paper (pdf 134 kb).

2. 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.

3. 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.

4. The OFT has previously provided some clarification on what constitutes irresponsible lending in its general fitness guidance - download Consumer credit licensing - general guidance for licensees and applicants on fitness and requirements (pdf 262 kb).

5. There is also pre-existing guidance available in the OFT's Non-status lending guidelines issued in 1997 - Non-status Lending - Guidelines for lenders and brokers (pdf 45 kb).

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

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

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