By: Nicola Hughes
Published: October 2008
Shelter welcomes this scoping paper on the Office of Fair Trading’s (OFT) irresponsible lending project and agrees that greater clarity is needed as to the definition of irresponsible lending for the purpose of fitness tests under section 25 of the Consumer Credit Act. The expected outcome of guidance for credit licensees will be particularly useful in helping lenders to identify good practice and should be more detailed and comprehensive than the existing 1997 Non-Status Lending Guidance.
Given Shelter’s speciality in housing and homelessness, our comments in this consultation response pertain primarily to secured loans (second charge mortgages) secured against residential property. We have noted the rise in repossessions in the current economic climate, including actions taken by second charge lenders. Shelter advice workers have reported some cases where possession orders are being carried out by second charge lenders who have only a relatively small charge in the property, and a worrying lack of forbearance and willingness to negotiate by some lenders. We are increasingly concerned about the potential uses of charging orders in the county court by creditors and poor consumer understanding of the implications of these. Greater and protection against irresponsible lending through the licensing regime could help to curb these sorts of problems.