Citizens Advice Challenges OFT To Use New Powers

Citizens Advice has passed a dossier on poor behaviour by four payday lenders to the Office of Fair Trading (OFT). The timing of this move by Citizens Advice appears to be connected to new powers that the OFT will have at their disposal from next Tuesday. By publicly announcing the handover of these files Citizens Advice appears to be throwing down a challenge to the OFT to demonstrate their will to use these new powers against payday lenders where there is a case to do so.

The evidence passed over is stated to include:

• Lenders adding inflated charges and fees.
• Continuing to take payment even after debts have been fully repaid.
• Charging late fees after obstructing client attempts to make payments online or by telephone.
• Unduly excessive levels of contact when chasing debts.
• Chasing individuals for debts that they never applied for in the first instance.
• Staff at the payday lenders acting in an aggressive or abusive manner.

The four payday lenders have not been named as yet, though it is reported that two of them are “household names”.

In the past the Office of Fair Trading has had difficulty in acting against consumer credit licence holders, even where it is quite apparent that they are causing significant consumer detriment. Should they decide to strip a firm of its licence the company can continue to trade through a lengthy process of appeals. This creates an obvious threat that more consumers will be treated poorly in the interim.

The new powers that the OFT will receive from Tuesday of next week allow them to immediately suspend the licence of any licenced firm where there is a clear and urgent need to protect the interests of the public.

It would appear that Citizens Advice believe that there should be urgency in taking action given their discoveries and evidence. Chief Executive Gillian Guy said, “Our evidence shows these lenders are behaving as a law unto themselves. Excessive fees and charges are escalating debts and people are worried sick as companies bombard them with texts, emails and phone calls often overstating their debt collection powers”.

A spokesman for the OFT has said, “We would like to highlight that the new power to suspend can only be used in the most serious cases of immediate harm, but we won’t hesitate to use it where cases fit that bill.”

The Office of Fair Trading has itself been conducting a significant investigation into the UK payday lending sector and has put the industry on notice that standards must improve or individual firms will be subject to serious sanctions.

Our trust deed forum has provided a steady stream of evidence about poor operating standards within the payday loan sector. Increasing numbers of people are finding that they must consider serious debt solutions such as Scottish trust deeds as a result of multiple payday loans being provided and often “rolled-over” both excessively and expensively. In addition we have frequently heard that some payday lenders have been lending to individuals that are part way through their protected trust deeds. This would appear to be a clear example of irresponsible lending.

It is likely that further details will emerge on this story, and the possible use of the new OFT powers, over the coming weeks.

Tags: Citizens Advice, oft, payday loans, trust deed