Clearer rules for credit industry

The credit industry is to undergo major reform in a bid to help make products clearer to the consumer.

11:30 09 June 2004

The credit industry is to undergo major reform in a bid to help make products clearer to the consumer.

The new rules will mean that all credit agreement and loan adverts will be subject to tighter control and will introduce a set way of calculating interest charged to borrowers. In addition charges for paying of loans early will be reduced.

A recent study proved that even lecturers at Cambridge University took over an hour to work out how different interest rates compared on different products. Suggestions about how to change things include and "honesty box" on loan applications. This would tell consumers how much interest they will be charged on a month's outstanding debt of 100.

Consumer minister Gerry Sutcliffe believes the reforms will improve the sector, commenting: "The reforms ensure that, at every step from the moment a consumer considers using credit to when they sign on the dotted line right through to when the agreement ends, they will have the fullest information possible."

The reforms follow a growing concern that the UK is moving toward a debt-ridden society.

But some consumer groups believe the reforms do not go far enough, claiming that the new guidelines contain numerous loopholes, especially for those advertising credit products.