The government has announced it is introducing new legislation, which will provide the Office of Fair Trading with the authority to immediately suspend the consumer credit licence for rogue businesses.
The move is intended to provide additional protection for consumers, to ensure that dubious financial firms are not permitted to keep trading whilst an appeal is considered.
The Office of Fair Trading has recently taken steps to remove the consumer credit licences from a number of firms it believes are in breach of the rules. However, the current system allows the companies to continue to trade whilst an appeal is heard. This can mean that a firm believed to be acting in an inappropriate, unfair or unethical way, can draw in more customers in the two years it could take for the appeal to be processed.
The changes being proposed by the government, mean that the OFT would be able to suspend licences immediately in cases where it feels the public needs protection. The changes were part of the recommendations made by the BIS Select Committee, when it produced a report on the debt management industry four months ago. The new powers granted to the OFT would cover any company providing debt advice, as well as lenders and those providing either services or goods on credit. Debt collection agencies will also be subject to the new rules.
There have been many calls to provide the OFT with greater authority and this amendment to the Financial Services Bill will do just that.
The OFT has said it will complete a consultation process later in the year about how the new powers will be used and will publish a full guidance report in early 2013. The OFT will pass its responsibilities for consumer credit to the new Financial Conduct Authority, when it eventually comes into force in 2014.