New credit law to target extortionate lenders

Loan firms that charge crippling interest will be the target of tougher laws, the Government will announce this week, writes Jo Dillon.

Ministers want to stop lenders demanding interest as high as 80 per cent. They aim to break damaging borrowing cycles and end some of the desperation caused by debt.

In a wide-ranging review of the Consumer Credit Act, the Government aims to tighten the law, which now merely protects people from "grossly extortionate" interest rates.

It will be one aspect of a two-year programme to sort out the law governing credit. Among the proposals is a plan to put small print under the magnifying glass. Ministers are concerned that so-called "interest-free" credit deals do not make clear the sting in the tail.

Customers have complained, according to the evidence of Citizens' Advice Bureaux and other charities and groups helping people in debt, that the penalties, even for the tiniest breaches of the agreement, can be severe and are rarely pointed out.