OFT issues guidance on irresponsible lending
by Gill Montia
Story link: OFT issues guidance on irresponsible lending
The Office of Fair Trading (OFT) has issued guidance on what it considers to be irresponsible lending.
In a consultation document, the watchdog says it wants to clarify “minimum standards” required from lenders which, if breached, could lead to the OFT taking enforcement action.
The guidance identifies the types of policy and procedure that the OFT would expect lenders to put into practice as follows:
Ensuring all key information provided to prospective borrowers is clear and easily understandable and properly explained to them.
Assessing a prospective borrower’s ability, in the context of their overall financial circumstances, to afford to meet repayments in a sustainable manner.
Dealing with borrowers in default or arrears in a fair and proportionate manner, seeking to repossess a borrower’s property only as a last resort.
The document also sets out some specific practices that the OFT considers to constitute irresponsible lending, including:
Encouraging borrowers to increase existing debt when borrowers may face difficulties clearing their debts.
Targeting specific groups of vulnerable borrowers with credit products that are likely to be inappropriate for them.
Using high-pressure selling techniques or inappropriate inducements.
Commenting on the consultation, the OFT’s director of consumer credit, Ray Watson, says: ‘It is important that consumers are protected from lenders acting irresponsibly, especially in tough economic times. We believe that clearly setting out minimum standards expected from the industry will help to achieve this.”