114/10    20 December 2010

The OFT has today announced it has taken targeted enforcement action and sent over 50 warning letters as part of its work to improve standards in the home collected credit (doorstep lending) industry.

Over the last year, the OFT has found that more than half of all applicants for a home collected credit licence, including those applying to renew a credit licence, failed to satisfy the OFT that they would provide customers with the right information and credit documentation.

Although most large providers and trade association members are compliant, some smaller traders have failed to put appropriate compliance procedures in place.

As a result, the OFT has sent letters to over 50 credit licence holders and applicants giving them three months to provide documentation that satisfies the OFT that they are complying or will comply with the requirements of the Consumer Credit Act.

These letters also encourage lenders to join the industry trade body, the Consumer Credit Association, which provides additional support and advice on the use of documents and procedures that comply with the Act.

Recent enforcement action against doorstep lenders includes:

• the refusal to renew the licence of a lender who had committed an offence and shown a lack of relevant skills, knowledge and experience
• the refusal of a licence application after the applicant failed to declare a business associate who had committed offences involving fraud or dishonesty, and
• requirements imposed on Oak Financial Services requiring the lender to amend business practices to ensure borrowers are provided with the right information about their credit agreement and that regular borrowers are given yearly statements.

Both refusals noted above may be subject to appeals.

The OFT is also reminding people to chose their lender carefully and to compare costs of credit at www.lenderscompared.org.uk, an OFT supervised website that details all loans available from doorstep lenders.

 Ray Watson, Director of the OFT's Consumer Credit Group, said:

'We are working to improve practices in the industry to protect vulnerable consumers. Over the festive period, people are often looking to borrow money to cover their additional costs. Home credit can be a good solution for some people, but we strongly encourage borrowers to shop around for the cheapest and most suitable credit product available to them.'

NOTES

1. The OFT conducts extra licensing checks on doorstep lenders as it considers this type of lending to be high risk due to the potential vulnerability of borrowers being sold credit at home.
2. Over the last 18 months more than 200 licensees have been visited by the OFT and Trading Standards officers (acting on the OFT's behalf) and more than half have failed to fully demonstrate competence in a number of different ways, including no permission to call, a lack of pre-contract information, no cancellation rights given and no agreement or non-compliant agreements. This has led to the warning detailed in the release.
3. The warning letters sent are information requests sent under section 36 (b) of the Consumer Credit Act, which require traders to provide certain information to the OFT.
4. Home credit lenders are required by the Home Credit Market Investigation Order, made by the Competition Commission in 2007, to provide www.lenderscompared.org.uk with details of all loans they make available. Credit union loans are also included on the site on a voluntary basis. The website is paid for by the largest home credit companies. It is operated in partnership with organisations including the Association of British Credit Unions, the Consumer Credit Association and other independent representatives, including the OFT.
5. View the requirements imposed on Oak Financial Services (pdf 54kb).
6. The Consumer Credit Act 1974 (the Act) requires most businesses offering credit, lending money or involved in activities relating to credit or hire to be licensed by the OFT. The OFT requires businesses to comply with its Irresponsible Lending Guidance.