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Authorities slam crooked credit brokers

By Martin Fagan - news@consumerchoices.co.uk

OFT and Trading Standards clamp down on loan fee scams and wipe out debts owed to loan sharks.

Bogus credit brokers and unscrupulous loan sharks were dealt separate blows as the authorities came down hard on dishonest practices that target vulnerable people.

In two separate cases, the Office of fair Trading http://www.oft.gov.uk/ (OFT) threatened to close down dishonest credit brokers who demand upfront fees for loans they had no intention of arranging, and the Wales Illegal Money Lending Unit (IMLU) revealed it had wiped out £900,000 of debt owed to loan sharks since 2008.

The OFT acted as part of a general crackdown following a complaint from Citizens' Advice, which revealed some unscrupulous firms were cold-calling thousands of potential borrowers and offering loans in return for hefty fees.

Those who accepted for the loans were charged fees but many received nothing in return. Citizens' Advice said an upfront fee of £70 was not uncommon, but had seen some instances where charges of up to £300 were levied.

The OFT estimated 270,000 people have paid upfront fees to credit brokers in the past year and has asked the government to consider changing the law to ban the practice outright.

"We're very pleased to see the OFT taking action against some of the most unscrupulous practices in the credit brokerage industry,” said Mark Lyonette, chief executive of the Association of British Credit Unions (ABCUL).

"In recent years, there seems to have been an explosion in the number of businesses specifically targeting people in difficult financial circumstances and generating profits from outrageous fees and charges.”

In a separate event, loan books seized by the Wales Illegal Money Lending Unit (IMLU) £2.2 million had been lent to 1,700 people by illegal lenders before the team moved in.

IMLU has wiped out the £900,000 of outstanding debt, seized £3 million worth of loan sharks’ assets and has prosecuted a number of illegal lenders, with jail terms totalling 10 years and six months being handed down.