The consultation follows major changes to the Consumer Credit Act, which include the identification of irresponsible lending as a matter to which the OFT must have regard when it considers businesses’ fitness to hold a consumer credit licence.
The OFT’s irresponsible lending project will involve wide consultation with business, consumer groups and other stakeholders. One of the key outcomes of the project is expected to be clear guidance on lending behaviours and practices which the OFT considers to be irresponsible.
The study will consider all forms of consumer credit lending which the OFT licences and all participants in the market, including lenders, brokers and other intermediaries.
The possible issues the review could consider include the advertising and marketing of products, selling techniques, product design, use of credit scoring techniques, appropriateness of products to borrowers, sale of associated products and management of consumers’ accounts including handling of defaults and arrears.
OFT director of consumer credit Ray Watson says: “Credit is an important part of everyday life so it is vitally important that consumers are safeguarded from irresponsible lending and that businesses have clarity about what this constitutes. The OFT looks forward to hearing from a wide range of businesses, consumers and representative bodies on these issues.”