Regulatory activity to protect credit consumers

21st February 2011

Over the past week there have been a number of regulatory announcements connected to consumer credit. These announcements appear to form a small part of a wider overall push to protect the users of credit and those who currently find themselves in debt difficulty.

Individuals who are struggling with debt, considering a trust deed or already in a protected trust deed, are often those most vulnerable to a financial abuse of their consumer rights.

The OFT has sent out a warning to ‘credit brokers’ to ensure they treat all customers fairly when charging upfront fees for loans. Such loan brokers often advertise in newspapers, aiming their appeal at persons who may be experiencing difficulty in sourcing credit elsewhere.

Such brokers are not lending their own money; they simply act to connect a borrower with a willing lender (if one can actually be found). Two companies have been informed by the OFT that their licences will be revoked following the discovery that they were charging the debit and credit cards of clients without permission. They were also found to be making false statements regarding loans being ‘approved in principle’ or ‘pre-approved’ and did not refund brokerage feed where they rightly should have. They also did not refund brokerage fees when they legally were required to do so.

Credit and debit cards were in the news recently, following the announcement that Which? (the consumer association) has launched a ‘super-complaint’ against card processing charges set at levels way beyond the actual cost to the company. The best-known exponents of this dark art are budget airlines, one of whom would punish a family of four, booking return flights, with a £40 transaction charge, despite the cost of the actual debit or credit card transaction being as low as 20p. The OFT will now look into the complaint and decide whether further action is required.

An in-house blog in the Mirror sought to shine a light on the number of debt and credit firms the OFT has threatened with the loss of their license. The names of the debt management companies involved had not previously been in the public domain as the right of appeal exists. The list published did not include any of the major-name debt management or protected trust deed providers, although rumours persist some of the bigger names are amongst 79 debt management providers who have submitted evidence justifying why they should be allowed to continue to trade.

Curiously, the Mirror subsequently featured (the very next day) a success-story where a client had cleared their debts in full thanks to the help of one of the companies they had ‘outed’ the previous day as subject to serious OFT enforcement action.

It would appear the government and regulators alike are acting in a determined fashion to protect consumer rights within the financial services arena, in a bid to protect indebted consumers from poor lender practice, ensuring reputable debt advice can be found if required. In the long-run, this is likely to lead to a reduction in the numbers of protected trust deeds, as individuals seek debt advice sooner, receiving an improved outcome when they do. However, the short term economic pressure on inflation and wage stagnation are likely to ensure such benefits are not felt for some time.

If you are at the stage where you are contemplating a trust deed , our forum can provide some invaluable advice. With a wide range of contributors from varying areas of the debt solution arena, we can provide you with the complete picture.

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