The government says that tough new rules will now give consumers greater protection from loan sharks and debt collectors.
Lenders will now have to undergo a more rigorous test by the Office of Fair Trading (OFT) before they’re given a Consumer Credit Licence.
The OFT will also have more powers to tackle rogue lenders and debt collectors.
Previously, the OFT could only take away or refuse a licence for serious misconduct.
But now it will be able to impose a wider range of penalties – including fines of up to £50,000.
Companies wanting to lend more than £25,000 will also have to apply for a licence and consumers will be able to challenge unfair credit agreements in court – which the government says will make it easier for people to get redress.
The new rules are part of the Consumer Credit Act 2006.
Ministers say the act represents the biggest shake-up of consumer credit for more than 30 years.
Secretary of State for Business and Enterprise John Hutton said: ‘From today, there will be more protection for people who get caught out by rogue lenders who pretend to play by the rules but act like loan sharks.
‘Enforcers now have the powers they need to crack down on the small minority of traders who treat consumers unfairly. Pressure sales techniques, unfair terms and conditions, extortionate interest rates or aggressive debt collection practices will not be tolerated.
‘By cracking down on the rogues and driving up standards we will create a level playing field that will enable honest businesses to thrive.’