OFT given power to suspend consumer credit licences

Norman LambThe trading watchdog is to be given new powers to stop rogue money lenders and debt collectors in their tracks by instantly suspending their licences.

The Office of Fair Trading (OFT) currently has the power to suspend or revoke consumer credit licences, which firms need in order to do business, but they can continue to trade pending appeals, which can take up to two years to be heard.

The Government said the OFT's new power will be introduced in an amendment to the Financial Services Bill as it goes through Parliament.

The move forms part of wider Government plans to strengthen consumer protections and clamp down on the payday lending and debt management industries in a bid to weed out unscrupulous firms.

Consumer Affairs Minister Norman Lamb said: "This will put a stop to those companies who exploit vulnerable consumers whilst dragging matters through a slow legal process. It will also give a boost to legitimate businesses, with the swift suspension of unscrupulous traders."

The Government believes the new power will ensure that the OFT remains an effective regulator across the interim period before the handling of credit regulation passes to the new Financial Conduct Authority (FCA) in April 2014.

The OFT intends to consult in the autumn on how it will use its new powers, publishing guidance early next year before they come into effect.

Consumer groups welcomed the announcement. Sarah Brooks, director of financial services for Consumer Focus, said: "We strongly support this measure and applaud the Government for taking these steps.

"Companies under threat of losing their consumer credit licence have no incentive to improve their behaviour and some use the appeal process to gain more time to cash in at their customers' expense. Often it is the most vulnerable consumers who lose out the most."

Richard Lloyd, executive director of Which?, said: "The Government must now make sure the regulator has the resources it needs, and ensure there is no gap in supervision as these powers transfer to the Financial Conduct Authority."
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