The Office of Fair Trading (OFT) has suspended the consumer credit licence of Donegal Finance Limited (DFL) with immediate effect, the first time it has used its power to suspend a credit licence.
In a statement, the OFT said suspension of the licence was "urgently necessary to protect consumers". The OFT was granted the power to suspend licences in such scenarios under an amendment to the Consumer Credit Act 1974 which came into effect on 19 February 2013.
The licence allowed DFL to offer consumer credit, credit brokerage and debt collection, and trades under the names Donegal Finance, Donegal Investigations and Donegal Recovery. The Donegal Investigations website says it provides "no nonsense recovery" and a "no holds barred approach when collecting assets".
The firm also took part in the Channel 4 documentary The Repo Man, during which it repossessed vehicles and assets from companies and individuals who had not kept up loan or finance repayments.
Guidance published in February by the OFT explains a licence may be suspended with immediate effect if there is evidence of immediate harm, for example: "an imminent risk of harm to consumers, and/or ongoing detriment will be likely to continue to escalate if suspension action is not taken".
Staffordshire-based DFL has been asked to make representations to the OFT’s Adjudicator, which will decide whether to confirm the suspension.
The suspension will last for 12 months from the date of notice. If the OFT gives notice it is considering withdrawing the licence, the suspension will continue until the end of the company’s appeal period or until the OFT reaches its decision whether to withdraw the licence or not. Under the suspension, it is a criminal offence for DFL or any of its directors, employees or agents to offer or broker loans or recover assets.
A round table discussion of the state of debt collections and changing approaches to recoveries, hosted by Burlington Group, will be published in the June issue of Motor Finance magazine.