The OFT is cracking down on dodgy loan companies who are targetting people with bad credit records, offering “bad credit loans” and asking for upfront fees. Lovemoney.com describes the problem in a recent article -
“Another problem with the market for alternative credit is rogue traders who contact customers offering cheap credit in return for upfront fees.
These dodgy lenders usually contact their victims by telephone or via text messages, promising to provide attractive loans on payment of an upfront finder’s fee. Alas, many of these loan offers never materialise. Instead, dishonest credit brokers pocket the initial fees and then ignore customer complaints.
According to consumer watchdog the Office of Fair Trading (OFT), 270,000 UK consumers have paid upfront fees to loan finders in the past 12 months alone. Typically, these fees are between £50 and £70, but some are as high as £300.
Sadly, many of these consumers never receive a loan offer. In some cases, victims were badgered into handing over their bank details, only to find later that money had been taken from their accounts without permission!”
But the OFT has said it intends to crack down on companies charging fees in advance for bad-credit loans that they never provide. Such companies will be legally required to refund the fees if they do not arrange a loan within 6 months.
Debt management companies will also be targetted to clean up their act soon -
“The OFT is introducing new rules aimed at preventing debt-management companies from abusing vulnerable consumers.
Later this month, the OFT will bring in rules to stop debt-management firms from making misleading advertising claims; charging high, upfront fees; giving inferior advice; or dishonestly posing as charities.”
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