The laws on consumer credit are set for a major overhaul, the government has announced.

Following concerns by pressure groups and MPs, consumer affairs minister Gerry Sutcliffe said the new laws will target loan sharks, magnify small print and put a stop to irresponsible lending.

Forum Response: Barclays

Frederic Nze, consumer finance director at Barclays, told ePolitix.com: "Barclays welcomes the move by the DTI to abolish the old fashioned method of calculating personal loans using rule of 78 as it will make it easier for consumers to understand and make true comparisons when borrowing.

"We believe the consumer credit laws should go one stage further by ensuring early redemption penalties are clearly highlighted in marketing literature so consumers know the true cost of borrowing and encouraging consumers to look beyond the headline rate."

Forum Response: National Consumer Council

Ed Mayo, chief executive of the National Consumer Council, said: "Our credit laws are thirty years out of date and totally out of step with the essential role credit plays in most people's lives today.

"Current laws also lack the teeth to protect the poorest and most vulnerable from unscrupulous loan sharks. So we warmly welcome the government's commitment to a white paper promising much-needed action.

"We are especially pleased that our call to abolish the pernicious 'Rule of 78' has been heeded by the minister. It is an unfair and expensive penalty on the many people who pay off their loans early. It is important that the proposed new early settlement arrangements are kept under review, to ensure we haven't ditched one form of unfair small print for another.

"With some lenders already gaining a competitive edge by not charging customers for early settlement, the time must be right for other lenders to think twice about the charges they make when people settle their loans ahead of schedule."

Forum Respose: Association for Payment Clearing Services

Elanor Cann, corporate policy manager at APACS, told ePolitix.com: "APACS fully supports the move to modernise credit laws to meet the needs of today's market, and in particular welcomes the review of advertising legislation, which means the credit card industry can progress its proposals for the schumer box and for clarity on APR calculations".

Forum Response: Consumers' Association

Laurence Baxter, senior policy adviser at the Consumers' Association, said: "With credit card spending in the UK amounting to over three quarters of the EU total and debt rising, reform of consumer credit laws are well over due.

"We welcome the government's intention to abolish the 'Rule of 78'. We are disappointed, however, that while the DTI is proposing to abolish this rule it still plans to allow lenders to charge borrowers one month's interest which means consumers will continue to be penalised for settling loans early by credit companies.

"Until the government clearly outlines how this one month's interest is calculated it will be extremely difficult for consumers to work out what this will equate to. This solution is far from ideal. The only solution is to lift early repayment penalties on loans completely."

"We welcome the government's intention to launch a white paper in the Autumn. If it is to have a real consumer focus it will need to address irresponsible lending, credit agreements, loan sharks and unfair loan agreements.

"Tackling loan sharks who prey on those in financial difficulty is an important priority. One in five adults are affected by these loan sharks, costing our economy £16 billion per year, so after nearly 30 years it's about time something is being done.

"The most pressing task for the government is to establish a system of affordable financial advice to help consumers reduce their debt and plan for their financial future.

"Consumers' Association's proposals for a National Financial Advice Network is the only way to give consumers advice and help on a range of issues including debt and provide an accessible advice network to close the savings gap.

"The Consumers' Association shall remain vigilant throughout this white paper process to ensure that the government guarantees a market providing credit alternatives that are both accessible and affordable to all."