OFT publishes revised consumer credit guidance

2/08 7 January 2008

The OFT has published revised guidance on fitness and requirements for Consumer Credit licence holders and applicants, as well as a statement of policy on civil penalties for failure to comply with requirements.

Download guidance on fitness and requirements (pdf 147 kb)

Download guidance on the use of civil penalties (pdf 110 kb)

This revised guidance follows the reform of the Consumer Credit Act , which comes into force on 6 April 2008, and explains how the OFT will:

work with Local Authority Trading Standards Services to check that licensees in high risk business activities have the skills and knowledge needed and relevant business practices in place to carry out the activities covered by the licence to a reasonable standard, and
issue most standard licences on an indefinite basis, instead of every five years, but using the improved investigation and information-gathering powers to request information from traders at any time while they are licensed. In certain circumstances, the OFT can also obtain a search warrant to enter premises and seize documents.

The guidance also explains how the OFT will identify those applicants that pose greater risks to consumers and how they may be refused a licence or have it revoked, as well as focusing on new entrants and existing operators in sectors of the credit market where consumers may be at increased risk. The OFT also proposes to use new powers to impose requirements, and these may be used on licensees when the OFT is dissatisfied with their conduct or any other matter relating to the licensed business. Failure to comply with the requirements could result in civil financial penalties, and the OFT statement of policy on financial penalties sets out how the OFT intends to use this power.

Ray Hall, the OFT Director responsible for Consumer Credit said:

'This new guidance and statement of policy set out the standards which applicants and operators in the credit market must meet, and explains how the OFT will use its new stronger and more flexible powers to reduce risks to consumers.'

NOTES

1. The fitness guidance replaces the general guidance 'Consumer credit licences - Guidance for holders and applicants' (which was last updated in 2003.

2. The Consumer Credit Act 1974 has been amended by the Consumer Credit Act 2006 (CCA06). OFT is required under CCA06 to publish fitness guidance and to issue a statement of policy on its use of civil penalties. The statement of policy has been approved by the Secretary of State for Business, Enterprise and Regulatory Reform. The reforms explained in the guidance and statement of policy come into force on 6 April 2008.

3. CCA06 introduces two new categories of ancillary credit business, debt administration and credit information services.

4. A Consumer Credit Appeals Tribunal will be created to replace the current system of appeal to the Secretary of State for Business, Enterprise and Regulatory Reform for applicants who have been refused consumer credit licences and for those whose licences are under threat of being revoked.

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