The Government welcomes the Committee’s Report, which is particularly timely given the plans for the reform of consumer credit legislation announced by the Government in its White Paper “Fair, Clear and Competitive: The Consumer CreditMarket in the 21 st Century”. The Government shares the Committee’s view that there is much to do in this market to ensure that consumers are empowered, and that both business and consumers get a fair deal. It will continue to work with business, consumer groups, regulators and others to achieve this.

The White Paper was published on 8 th December 2003, and sets out the Government’s findings and proposals for reform across the range of issues covered by its Review of the Consumer Credit Act 1974. We intend to strengthen the licensing regime to enable more effective enforcement of standards of conduct; to enable borrowers to challenge unfair credit transactions rather than only those that are extortionate; and to provide for a system of alternative dispute resolution. These reforms will require primary legislation, which we will bring forward as soon as Parliamentary time is available. In addition, detailed proposals for amendments to secondary legislation to simplify the rules governing the advertising of consumer credit; standardise the calculation of the APR; make
the form and content of credit agreements clearer; introduce a fairer method of calculation of the costs of early settlement of loans; and for the facilitation of online credit agreements have been set out in a consultation paper published alongside the White Paper. The White Paper also sets out an ambitious implementation programme. We are committed to bringing the first changes into effect in October 2004.

The White Paper package is currently out for consultation – the consultation period closes on 15 th March 2004. The Government will finalise its proposals in the light of both responses to the White Paper and the Committee’s own recommendations. We will therefore submit a further paper in May 2004 once the consultation on the White Paper package of reforms has been completed and the results analysed.

The Government strongly rejects the suggestion by the Committee that the DTI has displayed a lack of awareness in its efforts to reform consumer credit legislation and is only now treating the issue of reform as urgent. We have always been determined to achieve a significant overhaul of the credit regime, but have been equally determined to do so in a responsible way. The exhaustive testing of proposals with stakeholders has been an essential pre-requisite to producing a regulatory regime that will remain relevant for many years to come in a fast-moving market.

We would also point out that it is important that any changes to the domestic regime in this area are compatible with the existing EU regime, and changes planned to it.As the White Paper explains, this has been and will continue to be a feature of the Government’s approach.

Download
PDF http://www.publications.parliament.uk/pa/cm200304/cmselect/cmtreasy/431/431.pdf