It has been revealed that firms who have been stripped of their consumer credit licence by the Office of Fair Trading will be allowed to re-apply for permission to trade, once the new regulator takes control.
The Financial Conduct Authority which is due to take over the reins in 2014, admitted rogue companies which have previously been banned, could be allowed to start trading again under new rules.
The current regulator, the OFT, has clamped down on poor practices within the consumer credit industry and has stripped firms found guilty of repeated, widespread or fraudulent practices, to protect the public from any further losses.
However, when the FCA take over from the OFT, these firms will be free to ask for a new licence, according to the latest reports.
A spokesperson for the Financial Services Authority, shortly to be disbanded, admitted the facts were correct but insisted that the new regulator would look very closely at the decision made by the OFT, rather than simply handing out a new licence.
Emma Thomas, a member of the FSA policy team, said that a previous revocation would be a ‘significant factor’ in whether the FCA decided to grant a consumer credit licence.
She also added that the FCA planned to take a vigorous approach to regulation in the consumer credit industry and warned firms to expect their costs to increase to a minimum of £1,500 for regulation. The FCA is believed to want firms to provide far more regular updates and reports, in order to have a better chance of identifying problems as soon as possible.
The FSA is also currently investigating whether another new body, the Prudential Regulation Authority, responsible for the stability of the financial system in the UK, could also have a role to play within the overseeing of the consumer credit industry.