Borrowers who face unfair terms and conditions will find it easier to take commercial lenders to court under new government proposals.
Consumers who want to challenge a credit agreement must currently prove it is 'extortionate' before a court can look at their case.
The new rules would introduce a broader 'fairness' test, making it easier to sue.
The proposals are part of a reforms package for 30-year-old credit laws.
They will be part of a Consumer Credit (Amendment) Bill, which the government hopes will be introduced before 2005.
Others proposals include stamping out loan sharks, making small print bigger in lenders' advertisements and introducing US-style honesty boxes to
present financial products in a standardised form.
Clear message
The proposed credit reforms give the courts the power to cancel loans if the borrower presents a convincing case that the terms and conditions of their loan were unfair.
The new fairness test will apply to all new and existing credit agreements when it becomes law.
However, consumers whose agreements end before the proposal becomes law would not be able to claim that they have been unfairly treated.
Last December, the Department of Trade and Industry unveiled a host of proposals to combat sharp practices.
These included a duty on lenders to increase the size of small print on agreements, and also to stop charging fees on loans settled early.
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We are sending the credit industry a clear message that, they must ensure all their terms are fair and they operate responsibly
