The Department of Trade and Industry is to initiate legislation that will increase the coverage of the Consumer Credit Act in terms of consumer borrowing.
After consulting with the industry and consumer organisations on the main issues, changes were agreed to give a greater level of consumer protection.
Previously, only loans of up to £25,000 were covered by the Consumer Credit Act. This has now changed and loans of over £25,000 also receive valuable protection from regulation.
Due to the fact that more people are taking loans for larger amounts, the old legislation did not protect all borrowers.
However, following the review Consumer Affairs Minister, Melanie Johnson said: "bringing more consumer borrowing within the scope of valuable legal protection was a key goal". She also went on to say that loan firms with unreasonable loan terms were consistently targeting those people with the lowest credit ratings. These are the people that need the most protection. The new legislation will also get rid of any penalties that consumers get charged for repaying their loans early.