Consumer credit shake-up

Thursday, 19 May 2005 12:00 AM

Consumers will be able to take disputes over credit agreements to an independent ombudsman rather than engage in expensive and lengthy court battles, under new Government plans.

The Consumer Credit Bill, which is being introduced into Parliament today, is part of the Government's drive to ensure consumers do not get saddled with unmanageable debt.

The bill will make it easier for consumers to challenge unfair lending practices and loan agreements, and require lenders to provide better information to consumers about credit accounts.

Consumer Minister Gerry Sutcliffe said that unfair lending and ill-informed borrowing "can cause real problems for some people."

"This Bill is an important step towards achieving our objectives of creating a fair, clear and competitive consumer credit market, and enhancing consumer protection, particularly for the most vulnerable," he added.

Increased powers for the OFT to take action against rogue companies, and a more targeted licensing system, also feature in the bill.

Measures to change the way consumer credit deals are advertised, and to improve the clarity of information on loan agreements are due to take affect shortly.

"This will help the credit market function more effectively, benefiting borrowers and fair dealing lenders," said the OFT's chairman Sir John Vickers.

Elsewhere, the National Consumer Council is calling for changes to the way the £2 billion a year home credit market operates, to make doorstep lending fairer and more competitive.

The NCC will put forward plans for a shake-up in the way the industry's 27,000 agents are paid, and to ban 'roll-over' loans to a Competition Commission open meeting in Manchester. Roll-over loans see consumers locked into expensive home credit deals paying interest on interest.

NCC chief executive Ed Mayo said: "There is no reason why low-income consumers should put up with less competition and lower standards than everybody else. Agents may be the friendly face of home credit companies, but in the unique setting of the home, consumers are also vulnerable to approaches that lock them into a long-term borrowing relationship with one home credit provider.

"A ban on roll-over loans with the same provider - alongside other key reforms to the agent-customer relationship - could go a long way to injecting more competition to benefit customers."

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