The Government has laid new consumer credit rules in Parliament to protect borrowers.
These rules implement the European Consumer Credit Directive, which will apply to unsecured credit agreements up to £60,260 and come into effect from 1 February 2011.
Lenders will have from 1 May 2010 until 31 January 2011 to comply with the new provisions, but are encouraged to offer consumers the new rights as early as possible.
The rules will work in conjunction with the Office of Fair Trading’s irresponsible lending guidance for lenders which will be published shortly.
The new rules for unsecured credit agreements include a 14-day window for consumers to cancel credit agreements without penalty and a right for consumers to make partial early repayment (this is in addition to the existing right to repay early in full).
Lenders will have to assess consumers creditworthiness before providing a loan and clearly explain their products to help consumers make the right choices.
A standardised information form setting out important information details for consumers will also have to be provided before they sign a credit agreement.
Consumer Minister Kevin Brennan said: “These new rules will further strengthen a culture of responsible lending and borrowing whilst helping put consumers back in the driving seat with their finances.
