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Following major changes to the Consumer Credit Act, which include the identification of irresponsible lending as a matter the OFT must have regard when it considers businesses' fitness to hold a consumer credit licence, the OFT said it was examining the issue.

The OFT said the irresponsible lending project will involve wider consultation with business, consumer groups and other stakeholders.

Robert Sinclair, director of the Association of Finance Brokers, said hopefully it should clarify the respective responsibilities of advisers and consumers. He said what the OFT had already found was it would be useful to come up with some guidelines and principles for responsible lending.

But Mr Sinclair added the OFT was aware of if demands were placed on intermediaries then responsibilities would also be passed on to consumers.

He said: "There are issues around consumer disclosure about what they have already got. Is the customer borrowing responsibly? It is about making sure individuals are asking the right questions. Hopefully we should get closer to establishing what questions advisers should be asking."

According to the OFT one of the key outcomes of the project is expected to be clear guidance on lending behaviours and practices the OFT considers to be irresponsible.

The study will consider all forms of consumer credit lending the OFT licences and all participants in the market, including lenders and intermediaries.

The initial phase of the project will involve full consultation to define the range and nature of the project.

The issues the review could consider include the advertising and marketing of products, selling techniques, product design, use of credit scoring techniques, appropriateness of products to borrowers, sale of associated products and management of consumers' accounts including handling of defaults and arrears.

Ray Watson, director of consumer credit for the OFT, said: "Credit is an important part of everyday life so it is vitally important that consumers are safeguarded from irresponsible lending and that businesses have clarity about what this constitutes.

"The OFT looks forward to hearing from a wide range of businesses, consumers and representative bodies on these issues."

Stephen Sklaroff, director general of the Finance and Leasing Association, said responsible lending was at the core of its members' businesses and he welcomed the OFT probe.

He said: "Our lending code ensures customers are treated fairly and that loans go through a sound and proper credit assessment. 

"We look forward to working with the OFT to ensure that these principles are incorporated in an effective way in their new guidance."