Crackdown on loan sharks

Debt campaigners have been calling for action

Credit businesses are facing a huge shake-up as the government cracks down on rogue traders.

The plans are outlined in a consultation document called Tackling Loan Sharks - And More!

Proposals include:

making it harder for companies to get licensed as credit businesses

fining firms which step out of line

forcing companies to carry out credit checks on customers before raising their limit.

There's been growing concern that people who can't get money from banks are being forced to go to companies which take advantage of them.

Sophisticated

The lobbying group Debt on our Doorstep says as many as seven million people have to use loan sharks.

It's the biggest shake-up of the system for 30 years.

Melanie Johnson: Protecting vulnerable consumers

The rules were originally designed for a credit sector that was much smaller and less sophisticated.

But the UK credit market is now one of the most competitive in the world.

Figures show that those who borrow are increasingly borrowing more.

In fact, Bank of England statistics released on Thursday report that total lending rose by £9.4bn in December, the highest monthly increase since records began in 1993.

There are concerns that the high level of personal debt is making the economy more fragile.

"There is no place for rogue traders, preying on vulnerable consumers, in today's credit market," says Consumer Affairs Minister Melanie Johnson.

The package of measures will incude new powers to help the Office of Fair Trading clamp down on cowboys.

Withdrawn

They won't be driven out completely, but will be monitored much more closely.

In the past the OFT could have withdrawn licences, but rarely chose to do so.

"We can look at the possibility of a graded series of fines or even the 'three strikes and you're out' type measures," says Melanie Johnson.

The government hopes the OFT will keep predatory lenders under control - it has resisted calls for upper limits on interest rates.

That's something which concerns campaigners, who feel the most vulnerable people are still left unprotected.

"Many companies in the home credit market charge hundreds of per cent interest rates and there's nothing in this statement about that," says Niall Cooper of Church Action of Poverty.

But the government says further proposals will tackle the problem of consumers being trapped in extortionate credit agreements.