Department for Business, Innovation and Skills
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Stronger Protection For Consumers Borrowing Money
Consumers taking out new deals on credit and store cards and personal loans are set to benefit from enhanced protection.
The Department for Business has today published proposals for draft regulations to take forward the implementation of the Consumer Credit Directive.
These include new requirements to promote responsible borrowing and lending, as set out in the recent Consumer White Paper.
Lenders will have to check consumers’ creditworthiness before they borrow, and fully explain financial products. Consumers will also be allowed a 14-day period within which to withdraw from credit agreements.
The finalised regulations will implement the requirements of the Directive to provide transparent, standardised information - helping consumers compare products, including the cost of credit on offer.
Consumer Affairs Minister Kevin Brennan said:
“These changes will build on the real help we’re already providing for homeowners, savers, pensioners and people with debts.
“Lenders will have to check creditworthiness and provide the information consumers need to make properly-informed decisions before they sign an agreement. Consumers will also have a new 14-day period within which they can opt out if they have second thoughts.”
The provisions are being published in draft form to allow experts to provide feedback on their effect. The intention is for new laws to be introduced by the end of the year – well in advance of the Consumer Credit Directive coming into force in June 2010.
Notes to Editors
1. The following will be new introductions to UK credit law:
· A duty on the lender to provide adequate explanations about the credit on offer to the consumer.
· An obligation on the lender to check creditworthiness before offering or increasing credit.
· A requirement to automatically disclose information to consumers of the identity of credit reference agencies holding information which has led to a consumer's application for credit being rejected.
· A right for consumers to withdraw from a credit agreement within 14 days, without giving any reason.
· A new right to make partial early repayment of credit (in addition to the existing right to repay early in full).
· Requirements for credit intermediaries to disclose fees they charge for arranging credit and to make clear whether they are tied to specific credit providers.
· A new standardised pre-contractual information sheet enabling consumers to compare offers more easily.
2. Information on the Consumer Credit Directive is available at: http://www.berr.gov.uk/whatwedo/consumers/consumer-finance/ec-directives/page29927.html
3. Earlier this month, the Government published its proposals to promote responsible borrowing and lending in its Consumer White Paper A Better Deal for Consumers - Delivering Real Help Now and Change for the Future. For more information go to: http://www.berr.gov.uk/whatwedo/consumers/consumer-white-paper/index.html
4. The Department for Business, Innovation and Skills (BIS) is building a dynamic and competitive UK economy by: creating the conditions for business success; promoting innovation, enterprise and science; and giving everyone the skills and opportunities to succeed. To achieve this it will foster world-class universities and promote an open global economy. BIS - Investing in our future
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