Jeanette Harwood said that this could happen if the OFT uses its newly found regulatory powers to their full potential.
“Irresponsible lending could become a very big issue if the rules are interpreted in a strict way," asserted Harwood. "According to the guidance document, irresponsible could include lending to those who show an inability to pay existing credit or only pay the minimum each month. Debt consolidation could become a thing of the past if the OFT takes a staunch line.”
Harwood said it would take time to see just how the OFT would use its new powers, which came into force in April this year as part of the changes to the Consumer Credit Act.
At the same time, new rules were introduced surrounding unfair relationships, and the courts can now take account of anything done or not done by a lender or intermediary in relation to the credit agreement that has been put in place, when deciding if a contract is fair.
Harwood said part of the difficulty was that no definition of unfairness existed and that market practitioners needed to make sure they could evidence and support any advice they had given to a client in terms of selling a secured loan.
The extension of the rules is also likely to see a number of ‘no-win no-fee’ complaint handling firms coming into the market and Harwood said it was up to individual companies to take every step possible to protect themselves.
She said: “We have seen it with endowments and we are beginning to see it with payment protection insurance. Secured loans could become the next big thing in terms of so called ambulance chasers.”
Harwood added: “Firms have eight weeks before the Financial Ombudsman will look at a case. It is important that firms use this time effectively and do not waste a single minute.”
