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Regulation set to cover loan sector

Concern as claim-chasers switch to personal loans

The Government will take initial steps to regulate the personal loan market this year.

It has raised speculation that Westminster could eventually intervene to regulate the entire loan market, which could have a massive impact on the mortgage broker and IFA sectors.

The Department for Constitutional Affairs plans to use legislation in the forthcoming Compensation Bill to police claim-chaser firms that set up loan operations.

The Claims Standards Council has already uncovered a number of claim firms moving into the loan arena and believes that the onset of regulation for claim-chasers will drive some companies into the personal loan market where there are vul- nerable consumers, which could prompt further action.

At present, loans up to 25,000 are controlled under the Consumer Credit Act although the 25,000 limit will disappear when the Consumer Credit Bill comes into force this year.

However, many commentators agree that the CCA is a weak touch compared with full FSA regulation.

British Insurance managing director Simon Burg- ess claims that the lack of suitable loan regulation is already wreaking havoc in the payment protection insurance market, even though PPI is a regulated product.

He says: “Loan sharks and certain mortgage brokers do not have the right habits when selling payment protection insurance. It is a free-for-all as anyone can have a go at selling a loan as long as you do not have a crim- inal record.”

Which? senior public affairs adviser Emma Bandey says: “We have been concerned for a while at the action of some loan com- panies that target vulner- able consumers.”

An FSA spokesman says: “We have no plans to regulate loans but you can never say never.”

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