Second charge loan providers 'must act fairly'

23/07/2009

Companies which provide second charge loans must have "appropriate regard" to issues of fairness for consumers and rival businesses, the Office of Fair Trading (OFT) has warned.

The organisation made the statement as it released new guidance for firms which offer the loans.

Second charge loans - often called homeowner loans - allow mortgage holders to take out further debt which is secured against their home.

The new OFT guidelines set out the minimum standards that businesses must achieve in order to receive a second charge licence from the body.

"Second charge lending is considered a high-risk activity by the OFT given the risk that borrowers could end up losing their homes if they default on payments," said OFT director of consumer credit Ray Watson.

"All businesses operating within this sector should act with appropriate regard to consumer protection and fair business practices."

Kevin Still, EuroDebt director, commented: "Whilst the guidance covers the entire lending process, there is a need to carefully look at the practices around the management of arrears.

"There has been considerable criticism from the advice sector with regard to some of the specialist lenders not treating customers fairly that have fallen behind on payments, putting their property at risk.

"EuroDebt welcomes the guidance and the OFT taking an active role in reviewing the conduct of lenders in relation to these guidance notes."

Tags; Debt Management and Banking,

• Share
• 
• 
• Store
• 
• Follow
•