Credit crackdown 'to start in October'

On average CAB clients many times their monthly salary

The government plans to unveil proposals to shake up consumer credit and perhaps crack down on loan sharks in October, as the clamour from regulators and pressure group builds, reports say.

According to the Independent on Sunday, new consumer and competition minister Gerry Sutcliffe is planning a White Paper - the precursor to legislation - which will propose tightening the rules under which the UK's 150,000 lenders are licensed.

The new rules should allow borrowers to take collective action when they are mistreated, not only against loan sharks but against high street lenders too, the paper says.

Consumer groups and regulators have been up in arms in recent weeks about the weakness of consumers' protections against dodgy loan offers, with the Office of Fair Trading last week calling for new laws.

And in May, the Citizens Advice Bureau (CAB) said the number of people having problems with debt had risen 47% over the past five years.

Time for a change?

Plans have been in the offing for new legislation for some time.

As the law currently stands, the only sanction the OFT has against firms abusing their position is to withdraw their licence.

And some experts believe it is too easy to get a licence in the first place, with the OFT currently unable to access criminal records when screening licence applicants.

The proposals due in October, according to the Independent on Sunday, would seal that loophole, as well as giving the OFT the option of imposing fines and licence conditions.

The changes are seen as particularly necessary because of the explosion of smaller credit offerings in recent years, with door-to-door lenders offering loans carrying sky-high interest rates and targeting the vulnerable.