Providers have been warned they face losing their credit licence if they mislead customers and are now obliged to assess whether borrowers can afford loans.
The judgement has come from the Office for Fair Trading (OFT), which has published guidelines on irresponsible lending, covering all areas from advertising to handling of arrears.
The regulator has been consulting on the guidance for almost two years, and now expects creditors to:
"This guidance helps all lenders avoid the risk of engaging in behaviour or practices which may lead to action by the OFT," said Ray Watson, director of consumer credit at the OFT.
The Citizens Advice Bureau's debt policy officer, Peter Tutton, said the guidance sent a clear signal that lenders must get their houses in order and was a big step towards ensuring consumers are treated fairly and not taking out credit that will lead them deep into debt.
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