The majority of areas within the financial service industry are now regulated by the Financial Services Authority (FSA), which ensures that consumers get the level of protection and the right advice on the financial products they buy.

Whilst products such as investments, protection, pension and home owner loan and mortgage products are all regulated by the FSA, one area which is outside this regulatory regime is that of consumer credit, which includes unsecured loans, credit cards and overdrafts.

Unsecured loans and other consumer credit areas are currently regulated under the consumer credit act, by the Office of Fair Trading (OFT), which does not offer the same level of consumer protection and advice, as other financial products which come under full FSA regulation.

The latest financial services bill is to be enacted shortly and this will see the end of the FSA, which is to be replaced by the Financial Conduct Authority (FCA) and the Financial Services Consumer Panel has proposed that unsecured loans and other consumer credit areas should be fully regulated by the new authority, once it comes into force.

Although the panel believes that unsecured loan and consumer credit regulation should be transferred to the FCA as soon as possible, they have also said that preserving the existing protection arrangements for consumer credit must be the over riding priority for the personal loan industry.

It is hoped that the plans will enhance consumer protection for those taking out personal loans and overdrafts, but new regulation could also make it harder for some individuals to get the loan they require and others may be excluded completely.

Adam Phillips of the Consumer panel said “The panel is calling for a common sense reform that will enhance consumer protection. Transferring the Consumer Credit Act powers to the FCA will make retail financial services regulation work in the way that most people expect.”