Newsroom

Provision of credit information services to be licensed

111/08    29 September 2008

Consumers who are thinking of paying for credit information services will have greater protection under new OFT licensing requirements coming into force on 1 October 2008.

The changes mean that any business wishing to provide these services will need to hold an appropriate consumer credit licence. In order to be considered fit to hold such a licence, it will need to be able to demonstrate that it is not engaged in any unfair practices such as making misleading claims to consumers about the services it can provide, either in advertisements or via its website.

The OFT would have serious concerns about the fitness of any 'credit repair' businesses making misleading claims about when they can alter credit files or improve credit ratings. Consumers should be wary of any business making such claims since entries in a credit record, including county court judgements or Scottish decrees, can only be altered or removed if they are factually incorrect or have been discharged.

Under UK legislation, consumers can already access their own credit files from credit reference agencies, in order to check for themselves whether the information held is correct or needs updating, for a payment of only £2.

Ray Watson, OFT Director of Consumer Credit, said:

'These further reforms to the licensing regime are important steps in protecting consumers, especially given the current economic climate where access to mainstream sources of credit may become more difficult - particularly for consumers with adverse credit ratings.

Businesses should be aware that if they offer credit information services without holding an appropriate licence, they will be committing a criminal offence and risk prosecution, and that any agreements they enter into with consumers whilst unlicensed may be unenforceable.'

NOTES

1. The Consumer Credit Act 1974 (the Act) requires most businesses that offer goods or services on credit or for hire, or that lend money to consumers, to be licensed by the Office of Fair Trading. Some small businesses count as consumers for these purposes.

2. The Consumer Credit Act 2006 strengthened the Act and many of the reforms aimed at updating key licensing provisions came in to force on 6 April 2008. The remaining reforms come into force on 1 October 2008 and will expand the scope of categories of ancillary credit business for which consumer credit licences are required.

3. As well as credit information services, the other new licence category coming into effect from 1 October 2008 covers the provision of debt administration services. The OFT will classify debt administration as high risk where it involves the administration of secured agreements and where the marketing of the business is aimed at consumers whose access to credit may be restricted.
                                                                                            
4. For further information on licence categories see the OFT guidance Do you need a credit licence? (pdf 205 kb). The information contained both in this guidance document and in this press notice should not be taken to be a complete statement of the law. The range of credit business is very wide and the law can often be complex. If you are unsure about how your business might be affected, you should refer to the Consumer Credit Act 1974 and, if necessary, consider seeking professional legal advice.

5. The OFT issued guidance for providers of debt management services in 2001. The Debt Management Guidance (DMG) sets out minimum standards of behaviour expected of licence holders who seek to re-schedule customers' repayment of debt and charge for doing so. The spirit as much as the letter of the DMG would apply to businesses engaged in the provision of commercial credit information services, including credit repair.

6. For information on the OFT's risk-based approach to consumer credit licensing see the OFT publication Consumer credit licensing: General guidance for licensees and applicants on fitness and requirements (pdf 262 kb).

7. The Data Protection Act 1998, which is administered by the Information Commissioner's Office (ICO), gives consumers the right to know what information is held about them, and sets out rules to make sure that this information is handled properly. Both the Consumer Credit Act and the Data Protection Act 1988 grant consumers a right of access to their credit reference files and where necessary a right to have inaccurate information corrected. Consumers can obtain a copy on request for a fee of £2. Details of how to go about doing this are contained in the ICO's published guidance 'Credit Explained', available on the Information Commissioner's Office website.

Back to:2008