The OFT has today published a response to the consultation on the scope of its irresponsible lending project, (see http://www.oft.gov.uk/news/press/2008/147-08).
The consultation on scope was launched on 1st August 2008, following changes to the Consumer Credit Act, which included 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 has decided that the project will examine the wider scope described in the 1 August paper. This means the project will consider behaviour and practices around a borrower's ability to repay credit alongside other issues including; advertising and marketing, selling techniques, product design, use of appropriate credit scoring techniques, and handling of defaults/arrears. Whilst this does not mean that OFT will automatically consider it necessary to provide detailed guidance on all of these areas, we believe that it would be helpful to have the ability to make clear our position on any conduct linked to bad practice throughout a particular business model or the lifetime of a particular product.
The project will now move into a research and analysis phase with continual engagement with stakeholders, in order to identify the key issues that the guidance needs to address. There will be a series of workshops to discuss relevant issues starting in early February. The OFT will issue draft guidance in the spring of 2009 for consultation and anticipate publication of final guidance in the summer of 2009.
As part of the ongoing review of irresponsible lending, Paymex this week hosted a visit by staff from the OFT during which we showed them examples of our customers whose level of overindebtedness would suggest that the lending made to them was irresponsible. In one a case a manual labourer with a total income of £1400 a month after tax had obtained credit from nearly 80 high street lenders totalling nearly £400,000.