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13/02/2009
OFT Consults On Second Charge Lending Guidance
The Office of Fair trading (OFT) today launched a consultation on draft guidance for businesses engaged in second charge lending.
Second charge loans, or 'homeowner loans', involve consumers with an existing mortgage taking out further personal borrowing secured against their home. Defaulting on a second charge loan can ultimately lead to repossession. Firms offering such loans must be licensed by the OFT.
The consultation follows a government review of arrears and repossession policies and practices in the second charge sector. The review did find examples of good practice within the market but, as with other lending markets, there is scope for spreading good practice more widely.
The draft guidance covers a range of issues such as customer care, advertising and selling techniques, contractual terms and conditions, and practices around managing arrears or defaults. It sets out the standards of behaviour that the OFT expects from those businesses engaged in second charge lending.
The guidance is designed to complement existing OFT guidance for lenders. Responses to the consultation on this guidance will also be taken into account as part of the wider irresponsible lending project being undertaken by the OFT. Guidance on irresponsible lending is to be published in autumn 2009.
The deadline for responding to the consultation is 8th May.
(JM/BMcC)
Second charge loans, or 'homeowner loans', involve consumers with an existing mortgage taking out further personal borrowing secured against their home. Defaulting on a second charge loan can ultimately lead to repossession. Firms offering such loans must be licensed by the OFT.
The consultation follows a government review of arrears and repossession policies and practices in the second charge sector. The review did find examples of good practice within the market but, as with other lending markets, there is scope for spreading good practice more widely.
The draft guidance covers a range of issues such as customer care, advertising and selling techniques, contractual terms and conditions, and practices around managing arrears or defaults. It sets out the standards of behaviour that the OFT expects from those businesses engaged in second charge lending.
The guidance is designed to complement existing OFT guidance for lenders. Responses to the consultation on this guidance will also be taken into account as part of the wider irresponsible lending project being undertaken by the OFT. Guidance on irresponsible lending is to be published in autumn 2009.
The deadline for responding to the consultation is 8th May.
(JM/BMcC)
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