OFT consults on new power to suspend consumer credit licences

The Office of Fair Trading has launched a consultation on the use of its new power to suspend consumer credit licences, which it says will stop businesses from taking advantage of lengthy appeals processes.

Under the power, the OFT will be able to suspend licences with immediate effect or from a date it specifies, in certain circumstances. However, it will only be able to use the power where there is an urgent need to protect consumers from harm.

The consultation proposes that the watchdog will suspend licences with immediate effect in the most serious cases, such as where there is evidence of physical harm to consumers or the threat of such harm.

Factors the OFT said it would take into account when deciding to use the power included evidence that the business “has engaged in violence, fraud, or dishonesty, or is targeting vulnerable consumers with harmful practices”.

The watchdog said it would also take into account a failure to address concerns that it or partner organisations such as local authority trading standards services had raised.

Once a licence is suspended, the licensee will be treated in law during the period of suspension as if they were unlicensed. Engaging in licensing activities whilst unlicensed is a criminal offence, the OFT said.

The power, which is being provided by way of a Government amendment to the Financial Services Bill, is expected to come into force in Spring 2013.

The OFT said: “The power will strengthen significantly the OFT's ability to protect consumers, allowing it quickly to put a stop to the licensable activities of businesses that otherwise would be able to operate until the end of an often lengthy appeals process.”

The consultation paper, which can be downloaded here, will last for 12 weeks. Final guidance is set to be published in February 2013.