Government squares up to exploitative lenders

Consumer bodies have welcomed the government's plans to crack down on unscrupulous lenders, announced in today's consumer credit white paper.

The proposals include using undercover 'loan shark hunters' to tackle gangs of criminals who lend people more than they can afford and then use the threat of violence to extort payment.

The National Consumer Council hoped the moves would offer greater protection to borrowers than current laws against extortionate credit, which have seen just 10 successful cases against loan sharks in the past 30 years. Deirdre Hutton, chairwoman of the National Consumer Council, said: "These measures have the potential to improve the lives of millions of people who use credit."

However, Liberal Democrat shadow trade and industry secretary Malcolm Bruce said the reforms were too little, too late "For those who have already got themselves neck-deep in debt in the run up to Christmas, the measures outlined in the white paper will come too late," he said. "Millions of consumers have borrowed far beyond their means on the basis of favourable interest rates, and any rise will inevitably spell financial ruin.

"It could be years until we see the implementation of the measures in the white paper. Before unscrupulous lenders feel the bite, thousands more consumers will become debt crisis statistics."

Other measures introduced by the white paper include greater clarity in advertising, in order that customers can more easily compare credit facilities. The DTI estimates that Britons could see savings of ?400 per household by changing to a cheaper credit card.

The White Paper also promised fairer rules for people who want to pay back loans early. According to the DTI, 70% of all personal loans are paid back early, but all too often the borrowers incur hefty early repayment fees.