Industry welcomes new powers for OFT

The Credit Services Association (CSA) and the Consumer Credit Counselling Service (CCCS) have both welcomed the announcement by Consumer Affairs Minister Norman Lamb, and Financial Secretary to the Treasury Mark Hoban of new powers for the Office of Fair Trading (OFT) that will mean that decisions to suspend the consumer credit licences of rogue firms will come into effect immediately.

At present, the suspension of a consumer credit licence cannot come into effect until the end of any appeal by the firm to the OFT, which can last as long as two years – allowing the company to continue to engage in the business practices deemed to be unfair to consumers. The Department for Business, Innovation and Skills (BIS) announced the new powers to address fears that firms will be able to take advantage of the two-year transition period to the new Financial Conduct Authority (FCA) regulatory regime to effectively ignore action by the OFT.

CSA President Sara de Tute says: “We welcome this news and look forward to being involved in the consultation process to ensure robust procedures are in place to make alternative arrangements for the consumer in the event of a company no longer being permitted to trade.”

The CCCS has also cautiously welcomed the revised Codes of Practice and a new Customer Charter published by the payday lending industry, but warned that lenders must now translate their commitments into real change to business practices on the ground.

The charity said that while the Codes include many welcome commitments, several issues remain unresolved, including concerns over the treatment of borrowers in financial difficulty and the significant problem of lending to people with multiple existing payday loan debts. Of the 17,414 payday loan borrowers counselled by CCCS last year, 58 percent had more than one payday loan and a worrying one in 10 held five or more.

CCCS released figures recently showing the growing problem of ‘payday loans with no pay day’, with one in 20 unemployed people counselled by the charity last year having pre-existing payday loan debts that they were struggling to repay.  A total of 1,243 unemployed clients (5.6 percent) held at least one payday loan last year, up from just 283 in 2009.