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Consumers taking out new unsecured finance deals are set to benefit from enhanced protection as more people find themselves facing huge arrears and repossession.

The Department for Business has published proposals for draft regulations to take forward the implementation of the Consumer Credit Directive. It will mean that lenders will have to check consumers' creditworthiness before they borrow, and fully explain financial products. Consumers will also be allowed a 14-day period within which to withdraw from credit agreements.

Kevin Brennan MP, Consumer Affairs Minister says: "These changes will build on the real help we're already providing for homeowners, savers, pensioners and people with debts.

"Lenders will have to check creditworthiness and provide the information consumers need to make properly-informed decisions before they sign an agreement. Consumers will also have a new 14-day period within which they can opt out if they have second thoughts."

This is welcome news, because many people are struggling to stay in their homes and pay their bills. But taking out more unsecured credit in the form of personal loans, credit cards and store cards simply is not going to help the situation.

The only way to escape from debt problems is to save and to try and rearrange your secured loans. Using a mortgage or equity in your home to deal with debt will mean less bills, lower rates and a better chance of getting back into the black in the future.

SOURCE: BIS, 23/07/09

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