New loan review planned by OFT

03/07/2009

The Office of Fair Trading (OFT) is to investigate loans provided for hard-up customers who have been shut out from getting high street credit in the recession.

According to the organisation, the competitiveness, lenders' business models and consumer protection would all be looked into, as part of the analysis of the short-term, high-interest loans.

Tighter credit conditions from mainstream banks due to the economic downturn have seen growth in this sector of the market over recent months.

The OFT's own figures suggest that the loans market could be worth £35 billion a year.

John Fingleton, OFT chief executive, said: "Low income consumers struggle to access credit and frequently have to resort to expensive, high interest options, and this has increasingly been an issue during the economic downturn.

"These consumers are vulnerable to exploitation. This study will look at the way this sector works to examine whether they get a fair deal, and whether outcomes in the market might be improved."

The announcement of the survey follows a report from the New Local Government Network, which showed that as many as 200,000 Brits could be at risk from loan sharks, due to their being shut out from all other forms of credit.

In a report released yesterday, the Bank of England also said that unsecured lending from banks remained tight over April-June - and was likely to decline further as the summer goes on.

Tags; Debt Management and Banking, Recent Graduate Debt, Credit Card Lifestyle,

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