Sub-prime and non-status lenders are to be investigated by the Office of Fair Trading as it revises its guidelines for the sector.
The OFT's annual consultation paper reveals that it is to consult on and revise if necessary its guidance on non-status lending. It says it wants to achieve the greatest benefit for vulnerable consumers and is also planning to conduct a compliance review of its debt collection guidance.
The aim of the review is to provide more guidance for sub-prime lenders so they will know what actions could lead to the revoke of their licence. The OFT says it wants to change the behaviour of lenders in the first place before their fitness to hold a licence is called into question.
This is the first time the OFT has considered changing its guidelines for subprime lending since issuing them in 1997, when it says there was clear evidence of exploitation in the sector.
Spokeswoman Rachel Clark says: “The market has changed significantly since our first set of guidelines on non-status lending were issued in 1997. What we are doing is updating our guidelines to provide more guidance, to try and change behaviour in the first place and improve compliance in the sector.”
Mortgageforce managing director Rob Clifford says: “Any product with premium pricing that potentially offers more commission can increase the risk of consumer detriment and so it is right that the OFT makes its parameters clear on the subject. That said, lenders and brokers should have nothing to fear.”