Sunset for Rip-Offs: Victims Will Sink or Swim No Longer ; the Legal Reform Giving Borrowers New Rights of Redress over Raw Deals from Lenders
Shaw, Annie, The Independent on Sunday (London, England)
A raft of new rights for borrowers has been introduced to allow them to take disputes with lenders to the Financial Ombudsman Service (FOS).
Before the start of this month, consumers had to go to court - often at great expense - if they were in disagreement with a loan company over unfair terms, for example, or outrageously high interest rates that were causing repayment difficulties.
Now, under the terms of the 2006 Consumer Credit Act, anyone who takes out a new loan or has an old one that wasn't paid off by 6 April can take their complaint to the Ombudsman to get a ruling.
These new regulations are part of the most far-reaching reform of consumer credit laws for more than 30 years. They supersede the 1974 Act, which has until now been the basis for most small loan contracts.
Previously, only 70 per cent of lending was covered by the legislation; all consumer credit offers are now included.
The new law covers anyone who funds an exotic holiday, say, or a new car or big store purchase using an unsecured personal loan, store card or another deal such as hire purchase. The rules apply to all consumer credit agreements except for mortgages, which are already regulated by the Financial Services Authority (FSA).
The types of business affected range from loan firms to credit- broking and debt-collecting agencies, and also retailers like electrical and motor dealers that arrange credit for purchases as a sideline to their main work.
What do the changes mean?
The new law will help protect borrowers, particularly those on low incomes, from rip-off merchants.
Huge difficulties can arise when poor loan advice from a broker, combined with vertiginous interest rates, push borrowers into trouble as they bite off more debt than they can chew.
What else do the new rules offer?
The Act also introduces the concept of an "unfair relationship". Anyone who holds a consumer credit licence must, by law, have an effective complaints procedure in place.
Failure to do so could mean the company has its licence revoked.
How a customer can complain - and how the grievance will be dealt with - must be explained in writing, and there must be a limit on the time taken to resolve the complaint, normally eight weeks. If no resolution is reached in this time, customers must be advised of their right to take their case to the FOS.
This process is the same one followed by the watchdog with all other types of grievance concerning financial services, such as those over endowment policies or bank charges: the FOS cannot consider a complaint until the customer has …
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Publication information: Article title: Sunset for Rip-Offs: Victims Will Sink or Swim No Longer ; the Legal Reform Giving Borrowers New Rights of Redress over Raw Deals from Lenders. Contributors: Shaw, Annie - Author. Newspaper title: The Independent on Sunday (London, England). Publication date: April 15, 2007. Page number: Not available. © 2009 The Independent on Sunday. Provided by ProQuest LLC. All Rights Reserved.