Credit market shake-up targets rogue lenders and loan sharks

Tougher regulations targeting rogue lenders and debt collectors have today come into force in a shake-up of the consumer credit market.

The new financial year sees lenders facing stricter rules when attempting to secure a consumer credit licence from the Financial Services Authority (FSA), with particular focus being placed on debt collection.

"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," said John Hutton, secretary of state for business and enterprise.

"Pressure sales techniques, unfair terms and conditions, extortionate interest rates or aggressive debt collection practices will not be tolerated."

Under the new regulations the Office of Fair Trading (OFT) can fine rogue lenders up to £50,000 and take away their licences. Licences for lending over £25,000 will also be needed.

Consumers will also be able to challenge unfair credit agreements in court – making complaining and getting redress easier.

Teresa Perchard, director of policy at the Citizens Advice Bureau, said: "New powers to fine companies for bad behaviour and to set clear standards for licence holders should give the OFT the abilities it needs to round up the cowboys and to clean up the market.

"We gave advice on over one million consumer credit related problems last year - many hundreds of thousands of which concerned contract terms and unfair trading."

John Fingleton, OFT chief executive, added: "This will mean we can deal more effectively with behaviour 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."