AFB calls for feedback on OFT paper

7 August 2008

The Association of Finance Brokers is calling for feedback from its members on the Office of Fair Trading’s consultation paper on irresponsible lending.

The OFT is now obliged to consider a firms ability to deal with the irresponsible lending provisions when considering if a firm is fit to acquire, hold or retain a licence, whether a lender, broker or other type of intermediary.

The consultation follows major changes to the Consumer Credit Act, which include 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 issues the review could consider include the advertising and marketing of products, selling techniques, product design and use of credit scoring techniques.

It could also look at the appropriateness of products to borrowers, sale of associated products and management of consumers' accounts including handling of defaults and arrears.

The OFT will be consulting widely, initially via a scoping paper, with a view to providing a clear position on the test for irresponsible lending as part of the assessment of fitness to hold a licence.

Julia Cooper, policy analyst at the AFB, says: “When making the decision to lend, businesses take in to account things like affordability, repayment and risk levels. The precise reasons to lend will vary depending on the circumstances of each case and the OFT is aware that this flexibility must be retained.

“The outcome of this consultation will include the publication of guidance setting out the basic standards expected of licensees in relation to irresponsible lending practices.”

The AFB will be responding to this on behalf of members and stressing that the outcome must not shut off responsible lines of lending. It will also emphasise that dual regulation is not desirable and will present its own issues.

The consultation period runs from 1 August to 24 October.