The Office of Fair Trading (OFT) has launched an investigation into the conduct of the secured loans industry to examine its lending practices.
The OFT said that 60% of second charge mortgages were taken out for the purpose of debt consolidation, and it was growing quicker than the rest of the consumer credit market. John Vickers, chairman of the OFT, said: ‘Debt consolidation has grown fast to become a big market. Our study will assess how well the market is working for consumers.’
The move has been welcomed by consumer groups, who say an investigation into the sector, worth £8.7bn a year, is long overdue, as many borrowers do not understand what they are getting into.
Yvonne Gallacher, chief executive of Money Advice Scotland (MAS), said: ‘Consumer debt is a part of modern day society. But so too is irresponsible lending ‘ and we are aware of many cases where lenders and intermediaries have acted in an appalling manner. The OFT is to be applauded for launching this enquiry now.’
However, Richard Hurst, communications manager at Future Mortgages, said: ‘There are two sides to this. We only distribute products through professional intermediaries so we are confident that the brokers we deal with are offering quality advice. But in any industry there will be those who operate outside best practice and so anything that highlights and helps to remove them is to be applauded.’
The OFT plans to report its findings in January 2004.
l The Money Advice Trust has launched a website designed to help advisers to constantly update their skills. Wiseradviser online has been developed in conjunction with MAS and Citizens Advice Scotland.