Politicians in Northern Ireland have welcomed a radical overhaul of UK consumer credit laws amid concerns that loan sharks are preying on people in financial difficulty.
Mr Alasdair McDonnell, SDLP spokesman on enterprise, trade and investment, said the biggest shake-up of UK consumer credit laws for more than 30 years was good news for consumers.
Changes will include plans to put undercover officers on the trail of loan sharks, empower the consumer affairs watchdog to fine lenders and to launch surprise raids on loan firms.
Lenders will have to spell out agreement terms so consumers are no longer befuddled by the small print and know exactly what they are getting into when they take on more debt.
Trade and industry secretary Ms Patricia Hewitt announced that new pilot schemes targeting illegal loan shark practices would be set up on a pilot basis in Birmingham and Glasgow.
Mr McDonnell, however, has called on the pilot scheme to be introduced in Northern Ireland.
"Loan sharking is a major problem in Northern Ireland which brings financial misery to those who are already extremely vulnerable.
"A new team should be set up in Northern Ireland to investigate the problem and crack down on those responsible," he said.
In the Republic, regulation of licensed moneylenders transferred from the Office of the Director of Consumer Affairs to the new financial regulator, IFSRA, earlier this year.
IFSRA has already signalled that it intends to extend the consumer protection standards that apply to insurance brokers to moneylenders, as well as mortgage intermediaries and other companies.
The public register of authorised moneylenders reveals that moneylenders charge annual percentage rates of interest (APRs) of 30.9- 196.5 per cent.
Only a quarter of moneylenders on the Republic's register charge an interest rate of less than 100 per cent APR.
Loan shark activity typically increases around this time of year, as people refused a loan by a bank or other mainstream credit provider borrow from more expensive sources in the run-up to Christmas.
British government ministers have expressed concern that low-income households are particularly vulnerable to the extortionate interest rates and strong-arm debt collection tactics used by moneylenders.
"Credit can send people into a downward spiral of debt and despair," Ms Hewitt said.
The UK Department of Trade and Industry has also set out fairer rules for people who pay back loans early.
Ms Hewitt said the new laws were desperately needed to reflect the changes in society's attitude to debt. In 1971, there was only one credit card on offer in Britain. Now there are more than 1,300.
Fuelled by very low interest rates, consumer credit has been increasing by around £10 billion a month, getting economists worried that Britons are not budgeting for any changes in their economic circumstances and risking a crash in consumer spending in the future.
(Additional reporting: Reuters)
