Byline: John Duckers
A sweeping overhaul of the credit sector is expected to increase transparency and create a fairer framework for lenders and consumers, according to expert Joanne Davis.
The reforms in the Consumer Credit Regulations 2004 aim to deliver a balance of choice and protection for consumers, and to create fair competition between lenders.
Household debt broke through the pounds 1 trillion barrier earlier this year, and concerns are never far from the headlines.
Ms Davis, specialist consumer credit and asset finance lawyer at BPE, said: 'The Government recognises, however, that credit gives consumers greater control and flexibility over their finances, and is an important tool that drives economic activity.'
New rules on advertising come into force on October 31. Changes in relation to disclosure of information, agreements, and early settlement will take effect from May 31 next year, with more due to follow as Parliamentary time becomes available.
Ms Davis said: 'Essentially, the new regulations will oblige lenders to amend their advertisements, their contracts, and their systems for calculating rebates.
'The new regulations should also help consumers to be more confident about choosing credit products online, and make internet shopping quicker and easier. As with all legislation, however, the devil is in the detail and there are some crucial differences between what was previously proposed and what has been enacted.'
A critical objective of the new legislation has been to make advertising clear and intelligible.
'It all starts with the advertising,' said Ms Davis. 'If the advertisements are not compliant, then there are severe consequences for the lenders. Advertisements must allow consumers to answer three key questions. How much will it cost me? How much will it cost me if it goes wrong? And can I afford it?
'Lenders will have to provide standard information - particularly important for annual percentage rates as they are now required to show a typical APR - when advertising financial products so consumers can compare like-for-like and find the best deal.
'Potentially misleading expressions also come under scrutiny. …