Consumer credit shake-up targets rogue lending

Tough new sanctions on rogue lenders could be introduced under a new Bill introduced in the House of Commons by Trade and Industry Secretary Patricia Hewitt.

Measures in the Consumer Credit Bill would create a fairer, clearer and more competitive credit market, by bringing in new rules to give consumers better protection and more rights.

Patricia Hewitt said: "Since the introduction of the first credit card 30 years ago, the UK's consumer credit industry has today developed into an innovative and sophisticated market. For most people credit is a useful tool for managing their finances. But misleading information and unfair action by rogue lenders are a real problem for vulnerable consumers.

"After working closely with consumer groups, regulators and the industry we are taking action to improve protection for all consumers, and to make regulation better for reputable credit businesses. By empowering customers to challenge agreements and providing a more reliable regulatory framework and licensing system, lenders and consumers will have increased confidence in the UK's dynamic credit market."

Reforms proposed in the Bill include:
  • an independent ombudsman service to let consumers challenge agreements;
  • an unfair credit relationships test to let consumers challenge unfair practices and terms - not just rates;
  • a requirement for lenders to give consumers better information about their credit accounts;
  • improved powers for the Office of Fair Trading (OFT) to take action against rogue companies, including financial penalties.
Also proposed is an improved licensing system, limiting the burden on reputable businesses and freeing up the OFT to investigate companies suspected to be acting unscrupulously.

Backing the proposals in the Bill, Teresa Perchard, Director of Policy, Citizens Advice Bureau (CAB), which worked closely with DTI on the review of Consumer Credit legislation, said: "We strongly support key DTI proposals to reform our outdated consumer credit laws. For too long it has been too easy to get a consumer credit licence and too hard to take them away or penalise firms for bad behaviour".

The plans to modernise consumer credit law first introduced in the 1970s, have been welcomed by the OFT, which said that reforms to the 30-year-old Consumer Credit Act were overdue.

Currently, there are thousands of credit products for consumers to choose from and consumers make much more use of the credit services.


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