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The OFT closed on 31 March 2014 and this website is no longer being updated. The OFT's work and responsibilities have passed to a number of different bodies. Read more.

Second charge lending

The OFT has a duty to protect the interests of consumers by ensuring the fitness of those holding or applying for consumer credit licences. The OFT also has a duty to monitor social and commercial developments relating to the provision of credit and related activities. The OFT will take pro-active action where appropriate to investigate and address issues related to these duties which may raise concerns.


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Second charge lending

Second charge loans, or 'homeowner loans', involve consumers with an existing mortgage taking out further personal borrowing secured against their home. Firms offering such loans must be licensed by the OFT. Defaulting on a second charge loan can ultimately lead to possession of a borrower's property and, as such, it is considered to be high-risk under the OFT's approach to regulation.

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OFT guidance

To facilitate improvements in practices in the second charge lending sector, in July 2009 the OFT published guidance (pdf 105 kb) for the industry. The guidance sets out the minimum standards the OFT expects from businesses engaged in second charge lending if they are to be considered fit to hold a licence. It covers the entire lending process including selling techniques, customer care, and practices around the management of arrears.

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In addition to issuing that guidance the OFT also retains an ongoing monitoring role over the sector and, as a result of concerns about the practices of a number of particular lenders, launched an investigation into their activities.

The OFT's enquiry is focused around the entire lending process from the initial lending decision up to the handling of arrears and defaults and possession actions. The OFT wrote  to a number of lenders seeking further information to assess the level of consumer detriment in relation to the above. All lenders have since responded to the OFT. We are reviewing the information received with a view to deciding whether any enforcement action is appropriate. In some cases we have asked for further information and/ or we have undertaken or plan to undertake an onsite visit to assess compliance.

Details of any formal enforcement action taken will be available on the consumer credit public register and under Credit enforcement action on this site, as appropriate.

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