However, there are fears the changes will do little to help the most vulnerable borrowers, who often have no access to mainstream credit.
The Department of Trade and Industry is planning to update the 30-year-old Consumer Credit Act. Consumer affairs minister Melanie Johnson is proposing a two-pronged approach. A new body to handle complaints about lenders which will broaden the grounds on which credit agreements can be legally challenged, and access to the courts for group claims is to be made easier.
Lenders will also have to provide clear information about terms and conditions. However, the draft proposals do not include a mandatory interest rate cap.
Alister Blades, spokesman for Debt on Our Doorstep – a campaign network that includes the National Housing Federation – said: "It's a positive start. The CCA is thirty years out of date, and the government is getting there slowly.
"But the proposals are reacting once someone has a problem – there's very little preventative thinking. There should be better advice before people take out loans, and the banks need to be more responsive to a huge sub-prime market."
The proposals focus on the reaction once someone has a problem; there’s little preventative thinking
Alister Blades, spokesman, Debt on our Doorstep
Debt on our Doorstep is calling for the government's social exclusion unit to take the lead on the issue, and the bureaucratic social fund to be reorganised.
Andrew Chaplin, project manager of London & Quadrant Housing Association's Change community finance scheme, said: "I welcome the proposals wholeheartedly. I hope the consultation takes places with some urgency and that whatever emerges has some teeth."
"The majority of tenants with rent arrears have multiple debt problems. It puts pressure on the family unit, and can lead to homelessness."
The Change scheme followed research last summer which showed that 54% of tenants surveyed had debts, but only 20% had borrowed from mainstream registered lenders.
Source
Housing Today
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