New loan rules come into force

NEW rules to make it easier for consumers to shop around and compare different loans came into force today.

As a result of changes to the Consumer Credit Act, consumers must be given clearer pre-contractual information so they know exactly what they are signing up for.

The information will include the total amount of money they will have to repay, the rate of interest they will be charged and the cost of any default penalties or early repayment charges.

People will also have to sign a separate agreement if they want to take out payment protection insurance, so that they are clear they are taking out a separate product.

Consumer Minister Gerry Sutcliffe said: 'Hidden payments and lack of clarity are very unhelpful for people trying to manage their credit commitments, which is why we've brought in these changes.

'The pre-contractual information will help people shop around and make informed choices between the different products available to them, and the new level of clarity on loan agreements will mean that no-one is in the dark about what they are signing up for.'

The Government today also introduced new rules giving people who want to repay their loan early a fairer deal.

Although lenders will still be able to recoup some of the administration costs involved in settling a debt early, the Government has introduced a new way of calculating how much this will be that is fairer to borrowers.