OFT works to raise doorstep lending standards

The OFT has 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 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.'