Response to OFT draft guidance on irresponsible lending

Strongly welcoming the draft guidance on irresponsible lending published yesterday by the Office of Fair Trading (OFT), Citizens Advice debt policy officer Peter Tutton said:

“We have been saying for a very long time that there is a need for effective action to tackle irresponsible lending. Despite the credit crunch we are still seeing cases where people have been given credit that they cannot afford that has caused or contributed to severe debt problems. The recovery needs to be based on a new foundation of fairness and responsible lending if we are not to see a repeat of the current crisis a few years down the line. These proposed guidelines from the OFT set out a clear framework that should leave lenders in no doubt about the steps they must take to check people’s ability to pay back what they owe and to make sure people fully understand the terms of any credit they are taking out. The guidelines make it clear the OFT means business and are determined to act against lenders that behave irresponsibly, and we back them all the way in doing this.”

Nothing Fancy just Good Financial Information

Living on a low income, keeping loans under control and financial abuse are just three of the issues covered by a recession busting leaflet launched today by YWCA (www.ywca.org.uk). The guide is aimed at young women and features tips on saving money, low budget shopping and cutting costs.

The charity is concerned that women living on low incomes are currently finding it even more difficult to balance their limited weekly income. It believes they are getting into even greater financial difficulties.

“The women we work with have very limited incomes” says Sarah Payne, Chief Executive YWCA. “Within this leaflet we provide key pieces of financial information which, we hope, will help these women manage their very limited resources better.”

“In the current economic climate everyone is worried about money. But young women in some of the poorest communities are particularly vulnerable. They tend to be on low incomes and sometimes lack the skills to manage their limited funds” Sarah continues. “Young mothers and teenage girls, who have had to leave unhappy homes, can find themselves suddenly living independently with little or no support. They find themselves in charge of household bills, with responsibilities that they’ve never had to think about before. We hope this leaflet will help them and also highlight that YWCA is here to support them”.

Women are often in work that pays so badly they experience ‘in-work poverty’. Nearly two thirds of low paid workers are women. Sectors with the highest proportions of minimum-wage jobs are female dominated. For example retail, hospitality, social care, hairdressing and cleaning.

According to the Trade Union Conference (TUC) it is likely that women’s jobs will be affected more than in past recessions. More women have been made redundant since the beginning of 2008 than men. [TUC (2009) Women and Recession: How will this recession affect women at work?]

In times when money is scarce women on low incomes are more vulnerable to credit and store card offers, especially if they have young children. Often they do not realise the expensive interest charges they will incur if they do not pay off their account each month.

Linda Jack, Youth Policy Adviser at the Financial Service Authority (FSA) says “I welcome this excellent and timely initiative from YWCA. The young women they work with are likely to be disproportionally affected by the credit crunch and will need as much support as possible to be able to effectively manage their money. This leaflet, alongside the outstanding support YWCA centres already offer to so many young women, will be a lifeline for those struggling to make ends meet and make the most of their money.”

Some women attending YWCA centres have talked about boyfriends, having lost their jobs, taking money from them without asking and not paying them back or using their credit cards without permission – in some cases a form of financial abuse which is putting them in debt. The leaflet therefore looks at this issue and suggests ways to avoid falling into this trap.

OFT sets out responsive approach for uncertain times

The OFT has today published its Annual Plan, setting out its priorities for the year ahead.

The plan promises a responsive approach in a fast-changing economic climate - with the OFT geared up to anticipate and rapidly address developments that could jeopardise consumer welfare or threaten competitive markets. Consumer credit and the financial services are highlighted as areas likely to require particularly close attention.

The OFT's approach for the next 12 months follows four main themes:

* Maintaining constant standards through high-impact work
In 2008, competition investigations carried out by the OFT resulted in the first ever criminal convictions against individuals for price-fixing offences, and in the consumer field the OFT continues to pursue the court case to test the fairness of unauthorised bank overdraft charges. The OFT will continue to promote competition and protect consumers - businesses and individuals will not able to use the economic circumstances as an excuse to disregard their legal obligations.

* Responding to changing circumstances and events
The OFT is working to address the risks to consumers and businesses that the economic downturn may present. Regulation of consumer credit and financial services is increasingly important, for example, and the types of intervention the OFT uses may also change as a result of the recession. The OFT will be agile in deploying its resources to deal with shifting economic and social priorities.

* Influencing the debate around competition and consumer issues
The OFT will seek to influence debate to ensure strong competition is recognised as a key driver in supporting economic recovery, and that effective consumer protection builds public confidence in markets. The OFT will continue to provide positive input into government policy in this context, and will actively engage with business and trade associations on issues such as self-regulation and compliance.

* Working with partners
The OFT will further develop links with partners such as local authority Trading Standards Services and other government departments, as well as working closely with central government on issues relevant to the economic climate, such as consumer credit and priority sectors for future economic growth.

Philip Collins, OFT Chairman, said:
'These uncertain economic times require the OFT to be active, responsive and flexible in continuing to promote competition and protect consumers.

'The OFT will continue to take strong and decisive action where necessary to intervene in markets which are not working well for consumers, and will work closely with government, business and consumer groups to enhance public confidence in markets.'