Measures to protect borrowers 'needed'

Tougher rules are needed to protect consumers taking out loans and mortgages, according to one industry body.

The Organisation for Economic Co-operation and Development OECD has developed some new guidelines aimed at avoiding another credit crunch and subprime mortgage crisis.

In Good Practices on Financial Education and Awareness Relating to Credit, the organisation highlights the need for financial services firms to use clear, consistent and comparable language in all mortgage agreements to avoid confusing consumers.

It suggests that mortgage lenders should be required to display a summary of key terms and conditions of a loan and fully explain the effects of missing payments.

Lenders should also be made legally responsible for checking customers' credit needs and whether they will be able to meet their payments, it adds.

Commenting on the recommendations, Andre Laboul, head of the financial affairs division of the OECD, said "Even in the absence of the crisis, developments in financial markets, demographics, economic and policy changes all point to the importance of financial education and enhanced financial consumer protection."

A white paper released by the government last week outlined a number of proposals aimed at protecting consumers from being exploited by credit card firms.

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2009-07-08 13:31:57 © Moneyextra.com