Loan sharks to be in line of OFT bite
The new powers will allow the OFT to clamp down on rogue companies that provide goods and services on credit, money lending – including payday lenders, debt collectors and those offering to help people with ‘debt problems’.
Consumer Affairs Minister, Norman Lamb, said: “This will put a stop to those companies who exploit vulnerable consumers whilst dragging matters through a slow legal process. It will also give a boost to legitimate businesses, with the swift suspension of unscrupulous traders.
“The new measure is part of a concerted approach to strengthen protection around consumer credit, including issues such as payday lending and debt management. We want to encourage, and give the tools to, consumers to take sensible decisions.”
With the new powers the OFT will be able to suspend a consumer credit licence with immediate effect where there is an urgent need to protect the interest of consumers.
Currently the OFT has the power to suspend or revoke a consumer credit licence but businesses can appeal this decision. Firms are able to continue trading during the appeal period, which can last for up to two years. Consumers can suffer significant harm during this time.
The power will be introduced by an amendment to the Financial Services Bill at Committee stage in the House of Lords.
Financial Secretary to the Treasury, Mark Hoban, said: “Today’s announcement sends a very strong signal that the OFT will crackdown immediately on firms that exploit borrowers.”
“The Government has acted by strengthening the powers of the OFT and by moving the regulation of consumer credit to the FCA which will have a much broader range of powers to tackle lenders that break the rules.”
The new power will ensure that the OFT remains an effective regulator across the interim period before the handling of credit regulation is due to pass to the new Financial Conduct Authority in April 2014.
There has been widespread support for stronger powers for the OFT. The BIS Select Committee called for a fast-track procedure for licence suspension in its report on debt management in March 2012.
The OFT intends to consult in the autumn on how it will use this power, publishing guidance in early 2013 before the power comes into effect.
Richard Lloyd, executive director at Which? said: “Our research has found that people taking out payday loans are often caught in a downward spiral of debt so it is important that the Office of Fair Trading will have the power to instantly suspend the credit licences of unscrupulous lenders caught breaking the existing rules.
“This is a good step towards ensuring the regulator has the powers it needs to be a more proactive consumer watchdog. The Government must now make sure the regulator has the resources it needs, and ensure there is no gap in supervision as these powers transfer to the Financial Conduct Authority.”