Consultation on Credit Licensing 'Fitness' Conditions

The delayed consultation on the 'fitness' conditions for consumer credit licensees has today been issued by the OFT with a deadline for responses of 21st September 2007.

The consultation, which has been brought about as a result of changes to the licensing provisions contained in the Consumer Credit Act 2006, seeks to incorporate the concept of 'responsible lending' into the licensing framework for all consumer credit lenders. Although the consultation document references this fact, and provides some limited insight into the meaning of 'responsible lending' it goes onto promise that further guidance on this issue will be provided at a later stage - although no date is set for this, and it is unclear as to whether there will be a separate consultation on the matter.

The sections in the current consultation document on 'responsible lending' (paras 2.24 - 2.26 of the document) include the following:

"We consider irresponsible lending to include failing to make a proper and diligent assessment of the potential borrower's ability to repay a loan in full and to make all the periodic payments as they fall due.

The OFT would consider it irresponsible for lenders and intermediaries not to take reasonable care in making loans or advancing lines of credit in revolving credit card agreements. Reasonable care would include taking steps to find out and check the borrower's creditworthiness, and ability repay the debt and to meet the full terms of the agreement. For example, we would not consider offering new lines of credit to borrowers who are exhibiting typical signs of inability to repay existing debts (such as missed payments or always making only minimum repayments on a credit card account) to be responsible lending.

The OFT plans to produce guidance for the credit market to identify practices that we consider may be irresponsible lending. "

Debt on our Doorstep has today written to the OFT requesting clarification as to whether or not there will be a separate consultation on the concept of 'responsible lending' as a result.

We will be providing members with an opportunity to feed into the Debt on our Doorstep response to the consultation over the coming two months.