The British government has announced a radical overhaul of credit laws amid concern that household borrowing is running out of control.
Consumer debts have been rising at a record rate recently even before the key Christmas spending season started and ministers are worried the poor may be particularly vulnerable to unscrupulous lenders and extortionate rates of interest.
The changes will include plans to put undercover officers on the trail of loan sharks, empower the consumer affairs watchdog to fine lenders and to make surprise raids on loan companies.
Lenders will have to spell out the terms of the agreement so consumers are no longer befuddled by the small print and know exactly what they were getting into when they take on more debt. The Department of Trade and Industry also set out fairer rules for people who pay back loans early, which could save consumers around £60 million sterling.
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 circumstances and risking a crash in consumer spending in the future.
The Bank of England raised interest rates last month for the first time in nearly four years, partly to dissuade people from taking on even more debt that they could not afford.