Half of the 200 doorstep lenders visited by the OFT and Trading Standards failed to 'fully demonstrate competence'
The Office of Fair Trading (OFT) has today launched a crack down on doorstep loan providers, warning more than 50 firms they have three months to prove they are in compliance with the Consumer Credit Act, or they could lose their operations license.
Over the past 18 months the OFT and Trading Standards officers visited 200 doorstep loan providers and said half of them failed to fully demonstrate competence in a number of different ways.
Problems included failing to obtain permission from consumers to call at their homes and offer credit, not supplying pre-contract information, not talking people through the costs of the credit, and failing to explain their cancellation rights.
The government's consumer and competition authority said it sent the warning letters to 50 firms as part of its work to improve standards in the home collected credit (doorstep lending) industry. Over the past year it found that more than half of all loans firms who applied for a home collected credit licence (including those looking to renew their licence) failed to satisfy the OFT that they would provide customers with the right information and documentation.
The 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 Consumer Credit Act.
The 1974 act requires most businesses offering credit, lending money or involved in activities relating to credit or hire to be licensed by the OFT, and it requires businesses to comply with the OFT's irresponsible lending guidance.
The group said that while most of the larger loan providers are members of trade associations and operated in compliance with its requirements, other often smaller firms had failed to put appropriate compliance procedures in place.
The OFT said it recently refused to renew the licence of one lender who had "committed an offence and shown a lack of relevant skills, knowledge and experience"; and also imposed requirements on Oak Financial Services requiring the lender to amend business practices to make sure borrowers are provided with the right information about their credit agreement, and that regular borrowers are given yearly statements.
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."
Last week the OFT warned that hundreds of thousands of Britons could resort to using loan sharks to cover the cost of Christmas, and urged struggling families to avoid using illegal money lenders to pay for presents and festive celebrations. It has also cracked down on payday loan lenders, imposing requirements on Safeloans Limited (which trades as Paydayok) last week, and warning others they must not misuse direct debit facilities to vary the amount or date of a loan repayment.
The OFT is also reminding people to chose their lender carefully and to compare costs of credit at its Lenders Compared website, which details all loans available from doorstep lenders.
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