White Paper tackles loan-shark menace

Undercover investigators will get powers to target illegal loan sharks under plans to crack down on abuses in Britain's credit industry.

The Government announced details yesterday of the first major overhaul of the UK's consumer credit laws for three decades.

Patricia Hewitt, the Trade and Industry Secretary, said the new laws and regulations were aimed at helping the most vulnerable who were preyed upon by rogue lenders.

Trading standards officers in Birmingham and Glasgow will launch a pilot scheme in April backed by £2m of government money.

The "loan shark hunters" will be allowed to use undercover surveillance to gather evidence needed to recover the lenders' illegal profits.

The proposals in the Government's consumer credit White Paper include:

• Providing up-front information on interest rates, payment terms and penalty clauses;
• New rules for licensing lenders, which make it easier for the Office of Fair Trading to root out unsuitable lenders;
• New powers for the OFT to fine companies that breach their licence;
• Fairer terms for the 70 per cent of borrowers who choose to pay back their debt early.

The Government decided not to set a maximum interest rate, saying this could push up rates.

Laurence Baxter, senior policy adviser at the Consumers' Association said it was disappointed the Government had not abolished early settlement fees. "These fees put consumers off switching and tie them into expensive deals," he said.