1 The regulation of non- banking providers of consumer loans in the U.K. Gordon Ramsay Team Leader, Unsecured Lending Team, Consumer Credit Group at OFT

2 Making Markets Work Well for Consumers ● Non-Ministerial Government Department ● Promoting and protecting consumer interests throughout the UK, while ● ensuring that businesses are fair and competitive

3 OFT Tools SOFTER NON-ENFORCEMENT TOOLS COMPETITION ENFORCEMENT CONSUMER ENFORCEMENT Competition advocacy Abuse of dominance Merger control Unfair contract terms Unfair commercial practices Consumer credit Market studies/ investigations Business guidance Consumer codes Consumer advice/education Anti-competitive agreements

4 Consumer Credit Regulation: Licensing ● Loan providers: prime/sub–prime ● Retail finance ● Credit cards ● Home Collected Credit ● Payday Loans ● Brokers and intermediaries

5 Consumer Credit Regulation: Licensing ● >100,000 current licence holders ● Fitness test: Integrity and competence ● Options  Issue  Issue with requirements  Refuse  Revoke

6 Consumer Credit Regulation: No interest rate cap ● restricted availability of legitimate credit ● increase in illegal lending ● withdrawal of certain products ● High-Cost Credit Review is currently examining these matters once again

7 So how do we regulate? ● Prescriptive legislations supplemented by OFT guidance ● Licensing system, other regulatory tools ● Advertising regulations: Typical APR ● Unfair relationship test ● Irresponsible lending ● Market Review

8 Market review ● the level and nature of competition in the sector, including the impact of the economic downturn on competition and whether suppliers compete vigorously in a way which delivers benefits to consumers ● the business models of lenders within the sector ● the behaviour and decisions made by consumers when purchasing credit, and ● whether consumers have the appropriate level of protection and are given the information they need to make well-judged decisions

9 The regulation of non- banking providers of consumer loans in the U.K. Gordon Ramsay Team Leader, Unsecured Lending Team, Consumer Credit Group at OFT