Response - OFT Draft guidance on second charge lending

By: Nicola Hughes  Published: May 2009

Arrears and repossessions have risen dramatically as a consequence of the credit crunch and Shelter has seen a large increase in the number of clients seeking advice on these issues. The Finance and Leasing Association estimates that approximately 1750 second charge repossessions were made in 2008, although there is no data specific to second charge repossessions available from the Ministry of Justice. Shelter’s advice services continue to see poor practice amongst some second charge lenders, in particular with regard to arrears management, and we believe that good guidance from the OFT could help to improve lender behaviour.


Shelter believes that the parallel regulation of first and second charge mortgages, by the Financial Services Authority (FSA) and OFT respectively, can cause confusion for consumers. Both systems seek to regulate the same sorts of problems in slightly different ways, and both have different strengths and weaknesses. This can mean a lack of clarity and consistency of practice across the mortgage market. We welcome the recent Government commitment to review the regulation of mortgages and consider the merits of bringing second charge lending within the scope of the FSA. However, we believe that a singular, strong regulatory framework should take account of the differences between first and second charge lending and encompass the best consumer protections of both OFT and FSA regulations, particularly the ability to use time orders.


Download the full document: