Member Article

OFT not doing enough to protect credit consumers

The Office for Fair Trading is not doing enough to protect consumers using the credit market.

A report by the National Audit Office found that regulation of the consumer credit market was providing benefits to consumers, but was failing to protect borrowers from “unscrupulous” trading practices.

The report suggested the OFT is not equipped to carry out day-to-day supervision of firms and monitoring of their compliance with licence standards, and as such is not delivering value for money.

At present the OFT can only act when information of non-compliance comes to light, and therefore the NAO suggested it was not acting in a preventative capacity.

According to the NAO, UK consumers borrowed £176bn in 2011-12 from credit card companies; through hire purchase arrangements and payday lenders.

During the period, consumers were said to have lost £450m from problems that regulation did not address.

The OFT funds regulation from licence fees and the NAO say this is not enough given the size of the task.

Amyas Morse, head of the National Audit Office, said: “Good value for money in consumer credit regulation means minimizing avoidable harm, and doing so cost-effectively. The OFT has achieved a good return for a small outlay, but has not been able to tackle the full extent of harm to consumers in credit markets.

“This is because it has not had enough resource to regulate effectively or the right kinds of powers. The government’s proposed new regulatory system will need to address these problems.”

This was posted in Bdaily's Members' News section by Tom Keighley .