OFT to probe 'all-in-one' loans

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The Office of Fair Trading (OFT) has pledged to probe the marketing techniques of consolidation loan firms.

The OFT said it had spotted several breaches of credit advertising rules, which could lead to enforcement action.

Firms that tell loan applicants that they will make quick decisions without asking awkward questions could be acting irresponsibly, the OFT said.

People bundle their loans to reduce monthly repayments, but often incur more interest as a result.

Questionable practices

The OFT concluded that people often failed to take into account the length of the loan they were taking out or the total cost of it.

It added that consumers needed to be given clearer information by loan firms to help them decide whether taking out a consolidation loan was right for them.

"The OFT has uncovered a number of questionable practices and there needs to be urgent follow-up action. Borrowing more money to get out of debt is rarely a good option," Malcolm Hurlston of debt charity the Consumer Credit Counselling Service said.

The consolidation loan market was worth more than £40bn in 2002.