U.K. Introduces New Protections to Protect People From Rogue Lenders And Debt Collectors

Tough new protections come into force today to protect people from rogue lenders and debt collectors. The Consumer Credit Act 2006 represents the biggest shake-up of the consumer credit market for more than 30 years. Important measures within it come into effect today.

From today:

* Lenders have to undergo a more rigorous test by the OFT in order to get a Consumer Credit Licence. There will be a particular focus on high risk sectors like debt collection

* The OFT has more flexible powers to tackle rogue and incompetent license holders. It can now impose a wider range of penalties - from placing conditions on licenses to imposing a fine (of up to £50,000), or taking away the license

* The Government has removed the £25,000 threshold above which consumer borrowing is not currently regulated

John Hutton the Secretary of State for Business and Enterprise said:

“From today, there will be more protection for people who get caught out by rogue lenders who pretend to play by the rules but act like loan sharks.

“Enforcers now have the powers they need to crack down on the small minority of traders who treat consumers unfairly. Pressure sales techniques, unfair terms and conditions, extortionate interest rates or aggressive debt collection practices will not be tolerated.

“By cracking down on the rogues and driving up standards we will create a level playing field that will enable honest businesses to thrive.”

To ensure a smooth transition the Consumer Credit Act 2006 is being implemented in three phases - April 2007, April 2008 and October 2008.

Other measures of the Act being introduced today include:

* Extending the ability to challenge unfair credit agreements in court to cover all existing agreements (not just those made after April 2007). This change will make it easier for consumers to complain and get redress when they feel they have been treated badly

* The establishment of the Consumer Credit Appeals Tribunal for appeals against OFT licensing decisions

Teresa Perchard, Director of Policy at the Citizens Advice Bureau, said:

‘We are absolutely delighted to see these new laws being introduced. We gave advice on over 1 million consumer credit related problems last year - many hundreds of thousands of which concerned contract terms and unfair trading.

“New powers to fine companies for bad behaviour and to set clear standards for license holders should give the OFT the abilities it needs to round up the cowboys and to clean up the market.”

OFT Chief Executive John Fingleton said:

“The new provisions will allow us to adopt a more targeted approach to credit licensing based upon risk to consumers. This will mean we can deal more effectively with behavior which harms consumers while imposing minimal burdens on businesses that treat consumers well. All in all this means better regulation in the interests of consumers.”

Angela Knight, Chief Executive of the British Bankers’ Association said:

“Banks have been working hard to prepare for the new Consumer Credit Act requirements. These will extend the protections afforded to consumers by bringing more agreements within the regulations. We are continuing to work with BERR to ensure customers’ information needs are met when the new statements and notices requirements come into force in October.”

Source: Department for Business, Enterprise and Regulatory Reform

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