Trust-deed.co.uk supports the OFT despite criticism on their regulation of payday lenders

June 5, 2013 - PRLog -- The Office of Fair Trading has been subjected to a flurry of criticism from the Public Accounts Committee, an influential Parliamentary body which is dissatisfied with the “ineffective and weak” regulation of payday lenders.

The Public Accounts Committee (PAC) is unrestrained in its condemnation of the OFT, accusing the watchdog of not only failing to regulate the market effectively, but also of not properly understanding the burgeoning industry.

Adding weight to the Public Accounts Committee’s stance, are claims that the OFT “has never given a fine to any of the 72,000 firms operating in the market” and has “only revoked a company’s license on a handful of occasions.”

Chairperson of the PAC, Margaret Hodge, disclosed details of the OFT’s expenditure in regulating the industry, which amounted to £11.5m over the course of the past year. This represents just £1 for every £15,300 of approved loan. Despite appreciating that funding for regulation can be a problem, the OFT’s fee, even for a large credit card company, is currently only £1,075.        

The criticism of the OFT has not been accepted lying down, with a spokesperson for the watchdog responding that: “Far from timid, the OFT has taken strong, targeted action to tackle the areas of greatest risk to consumers. We are disappointed the Committee has not acknowledged the legislation under which the OFT currently operates.”  

It will come as little surprise that the consumer credit market in Britain is among the largest anywhere in Europe, with £176bn of consumer lending in 2011-2012 alone. Although credit cards and personal loans still account for the majority of the market, payday loans have seen a sharp rise in their uptake during the financial crisis, with the National Debtline reporting a 94 per cent increase over the past year in calls from individuals struggling to repay payday loans.

This emerging trend is due in no small part to the reluctance of the banks and building societies to continue lending, with people turning to payday lenders due to a lack of alternative options. However, the PAC believes payday lenders are overstepping the mark in their approach to targeting the financially vulnerable and have urged the OFT to take a more proactive approach, rather than waiting for complaints before taking action.

However, Andrew Graveson, an experienced debt advisor from Trust-Deed.co.uk, believes some of the criticism aimed at the OFT is unjustified: “It’s often forgotten just how many industries the OFT is tasked with policing without the resources or powers required to properly tackle every identifiable area of potential consumer detriment. Although their work is progressing at no more than a steady pace, it is clear that tackling unscrupulous payday lenders is right at the top of their list.”

The current priority for the OFT is to ensure the information payday lenders give to consumers clearly explains the potential cost of a loan. Misleading APRs should no longer be the norm, replaced by a statement of the Total Amount Payable in cash.          

Andrew Graveson added: “With responsibilities for the regulation of payday lenders due to be passed on to the Financial Conduct Authority (FCA) the approach is expected to change. The FCA will be provided with far greater powers and resources to tackle poor practice by financial businesses. If payday lenders continue to flout the rules they will be in for a rough ride from both the OFT and their FCA successors.”  

About: Trust-Deed.co.uk (http://www.trust-deed.co.uk/) provides an interface between members of the public and insolvency practitioner firms offering protected trust deed services. The site has a forum where questions are asked, information is shared and support is delivered to anyone that is worrying about their debts or their existing arrangement.