The Public Accounts Committee of the UK Parliament has strongly criticised the Office of Fair Trading (OFT), which regulates consumer credit in the UK, for failing to revoke the Consumer Credit Licence of doorstep lender Provident Financial Group. The Committee is reviewing the regulatory environment for consumer credit in preparation for the transfer of consumer credit regulation to the new Financial Conduct Authority (FCA) in April 2014.
In January 2013, Provident and payday lender Wonga both appeared in front of the Committee, before the OFT were also questioned by parliamentarians. Committee chairman Margaret Hodge MP described herself as “shocked” on hearing that 15% of Provident customers receive benefits, and “absolutely appalled” that 13% receive benefits from the social fund.
Ms Hodge confronted the OFT at their appearance before the Committee, saying: “I was appalled to hear from our officials that when they’d gone round with someone from Provident, he was encouraging new loans. That seems to me shocking practice. I don’t understand why you haven’t revoked their licence.”
Ms Hodge also questioned whether the company’s clients realise just how much interest they are paying. Provident’s typical annual interest rate is around 400%.
David Fisher, the OFT’s director of consumer credit, reminded the Committee that the OFT needed evidence before it investigated a firm. The OFT can revoke a licence or take other enforcement action if it has issues regarding a firm’s competence; any criminal offences committed, especially involving fraud or dishonesty; compliance with consumer credit legislation; discrimination; and deceitful, oppressive, unfair or improper business practices.
The Committee also questioned the OFT over the fact that it only spends £1 on regulation for every £15,304 in the consumer credit market.
Provident was founded in 1880 and now employs over 1,000 people in Bradford, West Yorkshire. It sponsors the local professional rugby league team, Bradford Bulls, and according to its website, wishes to be “the leading non-standard lender in the UK.” The site also refers to their “enviable levels of customer satisfaction.” It is expecting a pre-tax profit of £178 million in 2012 and to gain 300,000 new customer accounts.
In October 2012, an investigation by the BBC’s Panorama identified that Provident was prepared to offer a loan to a schizophrenic woman, even though the company’s agent described her as “not all there” to the undercover reporter.
The campaigning efforts of many MPs regarding the high-cost credit market have resulted in the FCA being granted the power to cap interest rates when it takes over consumer credit regulation. Such powers are widespread in countries such as the USA, Australia and Canada.