Consumer White Paper: Buying a Home

White Paper: Dodgy contractors, short drinks and sharp practices in motor trade are focus of consumer crackdown

MILLIONS OF borrowers trying to compare the cost of competing mortgages and other loans were offered a glimmer of hope by proposals to change the rules so that the APR or annual percentage rate, the current method of calculating the overall cost of a loan, is presented in a standard form by all lenders.

Will it work? This reform had already been mooted as a result of recent European Union directives recommending a change along these lines and the real devil will be in the detail.

Until now, lenders have been able to show different APRs for their loans, typically by basing them on the initial discounted period. But Stephen Byers, the Secretary of State for Trade and Industry, says that this information must be shown as based on the total length of the loan, not just the cheaper years.

Other proposals will need to be fleshed out further. For example, the proposal to strengthen the role of the Office of Fair Trading (OFT), allowing it to shut down rogue traders, will only be successful if the watchdog's present culture is altered.

Many experts believe that consumer credit licences, permits to lend money under OFT control, are too easily available and open to abuse by loan sharks and fraudsters who disappear with "advance fees".

Statutory controls over the mortgage industry are now the subject of a separate Treasury inquiry announced on Wednesday. For consumers to feel properly protected they need to be introduced quickly.