Consumer Credit: UK to undertake fundamental review of consumer protection and personal insolvency

The current personal insolvency regime was designed and implemented in haste by Peter Mandelson, one of Tony Blair's friends and close allies in government. Mandelson's approach was, in many ways, to ape that of the personal insolvency sections of the US Bankruptcy Code.

But it was never regarded as well thought through or successful.

Yesterday, coalition Consumer Affairs Minister Edward Davey met the All Party Parliamentary Group on Debt and Personal Finance, where he announced the review. It will be conducted jointly with Mark Hoban, the Treasury’s Financial Secretary, and will cover a number of areas, including:

· How consumers enter into credit commitments, including the way in which credit is sold and the extent to which consumers understand what they are committing to;

· What issues arise during the lifetime of a loan from both the consumer and the lender perspectives; and

· What happens if things go wrong; are the current insolvency solutions fit for purpose?

The review will be an opportunity for all interested parties to provide evidence on what is working well and where the Government can intervene to relieve pressures in the system. It is an opportunity to reshape consumer credit policy and will lead to a full consultation later this year or early next year.

Edward Davey said: “This is an opportunity not only to improve the safeguards on consumer credit products, where this is necessary, but to cut unnecessary regulatory burdens which increase costs and stifle competition.

“As Consumer Affairs Minister, I want to be sure that people can get fair deals on credit cards, loans and other products on the market - improving access for the financially excluded; having an insolvency regime where those who can, pay, but those who can’t are helped to make a fresh start; and ensuring a regulatory framework that’s fair to consumers and creditors alike.”

The Call for Evidence will be issued after the summer recess, which should lead to a consultation on specific proposals later this year or early 2011, says BIS