Loan Companies Must Lend Responsibly
Over the course of the past couple of years or so, lending criteria on personal loans, home owner loans and mortgages has become much tighter, as lenders have been more careful about who they are prepared to lend money to.
Prior to the credit crunch it was much easier for anyone to obtain the loan they wanted, with very limited checks to see if they could actually manage to afford the monthly loan repayments and many people believe that it was this irresponsible lending attitude which led, in part, to the credit crunch in the first place.
Since this time, regulatory bodies such as the Financial Services Authority (FSA) and the Office of Fair Trading (OFT) have taken a keen interest in those companies offering loans of any kind to customers, in order to ensure that they are establishing affordability and treating customers fairly.
As a result of this, the Office of Fair Trading has published guidelines for those companies offering loans which are designed to put a stop to irresponsible lending. The guidelines will cover everything from assessing affordability, to advertising, sales processes and loan arrears handling procedures.
The OFT has warned loan companies that any firm which is found not to be complying with the new guidelines could face the possibility of losing their Consumer Credit License.
A spokesman for the Citizens Advice Bureau said that the new guidelines sent a clear signal to loan companies that they must adhere to the OFT’s policies and ensure they are doing everything to treat customers fairly when they apply for a loan, or face any subsequent arrears problems.
Ray Watson, head of consumer credit at the OFT said “This guidance helps all lenders avoid the risk of engaging in practices which may lead to action by the OFT.”
