Office Of Fair Trading Looks Into Secured Loans
Anybody who applies for a mortgage or homeowner loan has the peace of mind in knowing that the product they are applying for and the company who are supplying it are both regulated under the Financial Services Authority (FSA), thereby ensuring that the company and the loan adhere to a strict set of rules and guidelines, which offer the consumer a high level of protection and knowledge of exactly what they are getting and what their commitments are.
However, this set of rules do not apply to second charge homeowner loans, or secured loans, which provide additional borrowing secured on a person’s home alongside the main mortgage, yet these can place a borrower’s home at risk just as much as the main mortgage.
Any company which offers second charge secured loans, must have a licence issued by the Office of Fair Trading (OFT) in order to do so and therefore work within the OFT’s guidelines on secured loans.
However, following an increasing level of arrears and defaults on secured loans, which can ultimately lead to a borrower losing their home through repossession, the OFT has conducted an investigation into this sector, looking into practices adopted by loan companies with regard to areas such as sales practices, customer care and arrears handling methods.
The guidance is intended to promote best practice within the secured loan sector, developing and building on the rules which already exist within the OFT’s guidelines and will run alongside their current study into irresponsible lending by banks, building societies and other loan companies.
The OFT has now issued its draft proposals for the new guidelines and any company who wished to respond to these must do so by early May this year. The final report is then expected to be issued some time in the autumn this year.
