Review of unsecured consumer credit market announced

08/04/2009

A new investigation of unsecured credit - including personal loans and credit cards - has been announced by the Office for Fair Trading (OFT).

In a statement released yesterday, the organisation said that the probe would concentrate on how borrowers are being treated by financial firms in the current financial crisis.

Fairness to customers is to be a particular area of focus - with many providers having tightened their criteria for borrowers in the wake of the credit crunch.

Kevin Still, EuroDebt director, commented: "We welcome the review, especially with regard to the focus on unsecured consumer credit. It is interesting that one of the questions raised in the review is the role of credit reference agencies and the role they play in responsible lending decisions, especially to higher risk consumers. I am sure this will also raise the issue of responsible borrowing around the issues of consumer behaviour and the degree of transparency in pricing of consumer credit products like loans and credit cards.

"It is our experience that many EuroDebt clients did not fully understand the terms of the agreements they entered when they were buying brown or white goods at retailers, selecting a mobile phone agreement or even their gym membership."

The OFT consultation is currently looking for input from financial professionals - a process which will run until June.

Another document on the matter will then be released the following month.

Kevin Still added: "The strategy review including whether credit granters treat customers fairly will hopefully providing better clarification on what credit using consumers can expect in the future and the advice they may be given when they are over committed or a poor credit risk.

"It is often easy for a consumer to become confused which lender they are dealing with when they initially call in to a well known brand call centre and find themselves being transferred from one provider to another until a lender is found that has an appetite for the risk profile of the caller. Often multiple credit searches are made on the credit reference bureaux, which can be detrimental to their credit score, especially if these occur very closely together - implying a high degree of 'credit hunger'."

Tags; Debt Management and Banking, Young Family Finances, Credit Card Lifestyle,

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