The Committee of Public Accounts concluded that the OFT was slow to act on its previous recommendations that people with a criminal past should be prevented from setting up business as a debt collector or lender.

In particular, the Committee expressed disappointment that the OFT still does not have routine access to centralised information on criminal convictions to check new credit licence applicants.

The damning verdict of the committee comes as new consumer credit legislation is being planned for the autumn.

Joined-up

The Committee said the battle to prevent criminals becoming lenders was being hampered by a lack of "joined-up government".

There is still far too little control to prevent unscrupulous lenders and debt collectors from obtaining a consumer credit licence Edward Leigh MP

In particular, the Home Office which was criticised for giving "apparently contradictory reasons" for not allowing the OFT routine access to the information contained in the police national computer and the Criminal Records Bureau.

In addition, the Committee said the OFT had been slow to introduce postcode-matching software to improve its checking of credit licence holders.

Edward Leigh, chairman of the Public Accounts Committee, said: "It is worrying that there is still far too little control to prevent unscrupulous lenders and debt collectors from obtaining a consumer credit licence."

However, there were some crumbs of comfort for the OFT. The Committee noted that a long-standing backlog of consumer complaints had been dealt with.

Last month, the Consumer Credit Counselling Service (CCCS) said that the cost of consumer credit licences should be raised in order to deter loan sharks and other unscrupulous lenders.

In addition, the CCCS said there should be a free ombudsman service for people to challenge unfair credit terms.

In the autumn, the thirty year old Consumer Credit Act is due to be overhauled in a bid to stop unscrupulous lending practices.