Will Labour get credit for lending reforms?

In what is widely expected to be the last Queen's speech before the next general election, a crackdown on unscrupulous and unfair lenders was announced today.

The consumer credit bill marks the most significant reform in almost 30 years, and will force lenders to give borrowers more information and make clearer the fees and interest rates they will be charged on credit deals.

Under the new rules, an "unfair credit test" will come into play, designed to make it easier for people to take lenders to court when they believe they are the victim of unfair lending practices. If people choose not to go to court, they can instead take their case to the financial ombudsman, who will investigate disputes for them.

Lenders will have to provide customers with an annual statement as part of the measures aimed at making borrowing more transparent and improving the level of information given to consumers. The office of fair trading (OFT) will be given greater powers to regulate the credit industry and will be able to impose fines as well as remove the licences of rogue lenders.

But do the new rules go far enough to protect the consumer? Here's what consumer bodies think:

Laurence Baxter, senior policy advisor, Which? (formerly the Consumers Association)

"Which? very much welcomes the announcement of the consumer credit bill, which should give greater protection against unfair lending and create a fairer and more competitive credit market, for example, by making it easier for people to challenge unfair or extortionate credit agreements. "We hope it will also improve the government's ability to take action against unscrupulous lenders.

"Only transparent information and products will create a truly competitive market. Which? is calling for a raft of measures:

· Credit cards having one way of allocating interest on their cards so that people can better compare rates;
· Sharing of customers' full credit history between lenders to ensure responsible lending;
· Banning the automatic inclusion of payment protection insurance (PPI) in credit quotes which bumps up the cost of the loan without customers realising."

Claire Whyley, deputy head of policy, National Consumer Council

"Our credit laws are more than 30 years old and well past their use-by date. So today's confirmation that last year's white paper proposals will crystallise into new credit laws is extremely welcome.

"NCC has campaigned hard for new laws that will oblige credit providers to lend responsibly and treat their customers fairly, that will introduce a tougher credit licensing regime than there is now, and that will give people with credit problems a simpler, more consumer-friendly redress system.

'What matters now is that these key reforms are included in the published bill and that they survive the parliamentary process which - with a general election on the near horizon - must suffer no delay."

Teresa Perchard, director of policy, Citizens Advice

"The law in this area has failed to keep pace with a rapidly changing credit market, and it is the low income consumers who can least afford it who have paid the price of inadequate controls.

"This bill gives us the once-in-a-generation opportunity to prevent more people becoming trapped in grossly unfair credit deals from which there is no escape. Credit providers who treat their customers fairly should have nothing to fear from this long-overdue reform, but abusers should no longer be able to shelter behind bad law.

"I am delighted that the government has listened to and acted on our concerns. I hope they will keep listening as they work on the detail of the bill. Consumers have waited a very long time for the law to catch up with developments in the credit market. Nothing should now be allowed to stand in the way of these reforms being put in place quickly."