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Personal Borrowing (Interest Rates)

Volume 451: debated on Wednesday 8 November 2006

To ask the Secretary of State for Trade and Industry what mechanisms are in place to protect consumers from unduly high interest rates on personal borrowing; and if he will make a statement. (99669)

Currently sections 137 and 138 of the Consumer Credit Act 1974 regulate extortionate credit bargains. These ensure that where bargains are extortionate, the courts may reopen the credit agreement and set aside the whole or part of any obligation on the debtor, require the creditor to repay the whole or part of the sums paid, return surety or alter the terms of the agreement. These provisions will be replaced by a test of whether a credit relationship is unfair when the Consumer Credit Act 2006 comes into force. This will enable the courts to take into account all the circumstances of the relationship between the borrower and lender, not just the terms of the agreement when it was made. The new Act will also strengthen the test of fitness to hold a consumer credit licence and provide the Office of Fair Trading with greater powers to take action against lenders who do not behave in a fit and proper manner.

In addition, we have already introduced new legislation to ensure that consumers are more aware of the terms and conditions associated with any credit agreement before they sign. This increase in transparency will enable consumers to shop around with confidence, choosing the right product to suit their needs.

The Government will continue to monitor the impact of these measures.