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Rogue money firms could face immediate closure from OFT
Businesses and individuals are to benefit from a Government clamp down on rogue companies that miss-sell consumer credit products or services.
The Office of Fair Trading (OFT) is to be given new powers to suspend consumer credit licences with immediate effect from companies that lend money, collect debt or help people with debt problems 'when there is an urgent need to protect the interest of consumers.'
The OFT currently has the power to suspend or revoke a consumer credit licence, although businesses can appeal against the decision. Firms are able to continue trading during this appeal period, which in some cases can last for up to two years.
'Consumers can suffer significant harm during this time,' the Department for Business, Innovation and Skills said.
The new power will enable the OFT to instantly shut down firms that breach consumer protection rules.
Consumer affairs minister Norman Lamb and the financial secretary to the Treasury Mark Hoban announced the new power which will be amended in the Financial Services Bill during a committee stage in the House of Lords.
Norman Lamb, said: "This will put a stop to those companies who exploit vulnerable consumers whilst dragging matters through a slow legal process. It will also give a boost to legitimate businesses, with the swift suspension of unscrupulous traders."
The new measure is a concerted approach to strengthen protection around consumer credit issues such as payday lending and debt management.
However, it will only last in the interim period before the regulation of consumer credit is handed over to the new Financial Conduct Authority (FCA) in April 2014.
The OFT is being handed more powers in response to an increasing number of consumer credit companies which have sprung up on the internet and high street in recent years.
Talking to the BBC, Lee Manning of insolvency trade body R3 welcomed the move, saying regulation of credit companies had been 'slow to keep up' with the boom.
Richard Lloyd, executive director of consumer group Which? said: "Our research has found that people taking out payday loans are often caught in a downward spiral of debt so it is important that the Office of Fair Trading will have the power to instantly suspend the credit licences of unscrupulous lenders caught breaking the existing rules."
He warned the Government must ensure the OFT has the 'resources it needs', and ensure there is 'no gap in supervision' as powers are transfer to the FCA.
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