It has recently been announced that the Office of Fair Trading is to look more closely into personal loans, and as a result lenders may have to provide details of just how many customers actually get the advertised loan rate. The watchdog has already started on the first phase of the probe into unsecured personal loans. This comes after complaints from consumers, who have stated that whilst the lender may advertise an eye catching headline APR, this rate actually seems impossible to get.
When a lender advertises unsecured personal loans they do so with a typical APR. The typical APR is the rate that the lender is claiming most borrowers are offered. In order to meet regulation this means that at least two thirds of borrowers must be receiving the typical APR. However, many customers are stating that these headline rates seems practically impossible to get, and in actual fact they end up being charged a far higher rate of interest than that advertised.
Whilst the Office of Fair Trading is in charge of overseeing advertised rates from lenders, as it regulates the Consumer Credit Act, it has admitted that this is not monitored regularly enough. It is claimed that over recent months some lenders have been advertising very low rates, which are in fact only available to a small number of customers rather than the two thirds that it should be available to.
One industry official said: ‘It’s about time that the OFT looked at the area of what rates consumers are actually being offered. From the consumers’ point of view, they need to know if they are actually going to get this rate if they apply for it. It’s massively confusing. If the OFT could do something to ensure that lenders are sticking to the rules, then it would help out consumers.’
