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Loans firms decision due from OFT Loan fee scams to be stopped by OFT
(about 1 hour later)
A decision over whether action should be taken against firms making unsolicited loan offers is due from the fair trading regulator later. Dishonest loan firms that demand upfront fees for loans they have no intention of making will be closed down by the Office of Fair Trading (OFT).
The Office of Fair Trading (OFT) must decide whether to intervene following a super-complaint from Citizens Advice. The measure is part of a general crackdown by the regulator following a complaint from Citizens' Advice.
The group said that unscrupulous firms were charging hefty up-front fees after offering to find loans for people who were desperate for cash. It reported that some unscrupulous firms were cold-calling thousands of potential borrowers and offering loans in return for hefty fees.
Some loans failed to materialise and calls to the firms were expensive. The OFT is making it mandatory for fees to be refunded if a loan is not agreed.
Citizens Advice said that the current economic conditions were providing "fertile ground" for rogue credit businesses, with many households facing financial difficulties. "Our evidence suggests some businesses are deliberately taking people's money upfront with no realistic expectation of finding them the type of loan they need," said John Fingleton, the OFT's chief executive.
The charity said it had spoken to people in England, Wales and Scotland who had suffered at the hands of unscrupulous credit firms. 'We will continue to take robust enforcement action against businesses using unfair or improper business practices and we are providing new guidance making very clear the kind of behaviour we expect from the industry."
In these cases, people had received a text message or telephone call from a firm offering to find them an unsecured loan. Law change
The OFT is also going to ask the government to consider changing the law to ban outright the practice of demanding upfront fees in exchange for arranging loans.
Citizens' Advice had complained, in a so-called "super complaint", that people had received a text message or telephone call from firms offering to find them an unsecured loan.
Those who accepted were then charged large up-front fees for little or no service in return.Those who accepted were then charged large up-front fees for little or no service in return.
Other victims were persuaded to hand over their bank details and later found that money had been taken from their account without their permission.Other victims were persuaded to hand over their bank details and later found that money had been taken from their account without their permission.
Victims struggled to get somebody to deal with the issue, and were charged a premium rate when calling to complain.Victims struggled to get somebody to deal with the issue, and were charged a premium rate when calling to complain.
They also found that, instead, they were being inundated by calls and text messages offering loans or debt management services from other firms.They also found that, instead, they were being inundated by calls and text messages offering loans or debt management services from other firms.
The OFT must respond to this super-complaint from Citizens Advice within 90 days of it being made. The deadline for that response is on Wednesday.
The Association of Business Recovery Professionals, which represents legitimate debt management companies, has also called for the OFT to step up regulation of the industry.
Have you been affected by any of the issues raised in this story? Send us your comments and experiences using the form below.Have you been affected by any of the issues raised in this story? Send us your comments and experiences using the form below.