Consumers confused by credit talk

Most people are baffled by the language used in credit offers, a survey commissioned by the Department of Trade and Industry suggests.
Of more than 1,000 consumers polled, 84% said they found the paperwork confusing, while 76% said the same of the terms used in credit advertisements

Some 59% did not know the acronym APR stood for Annualised Percentage Rate.

Forty per cent said they only read the main information on the front page of a credit agreement before signing it.

Eight out of 10 people said they would like more information on their rights.

I don't understand why a consumer should be penalised just because they want to take over their own finances
Laurence Baxter
Consumers' Association
The survey, carried out for the Department of Trade and Industry by polling company Mori, also found that two-thirds of people aged between 20 and 50 had a credit commitment of some kind.

Since current consumer credit laws were drafted 30 years ago the amount of outstanding debt Britons owe has soared from just £5.25bn in today's prices to £168bn.

In the same period the number of credit cards on offer has increased from just one to 1,300.

The number of licensed lenders has risen from 2,500 to 215,000.

Summary box

Consumers' Association spokesman Laurence Baxter said the credit industry was like a "jungle" with ever more complexity and ever more sophisticated cards, meaning there was a lot of information for people to try to understand.

"We want it all to be sorted out. We want it clearer, much more basic," he told BBC News.

"The government needs to take the lead."

The association wants the government to introduce a "summary box," outlining exactly what the costs of the credit will be, including interest and penalties for early repayment.

"I don't understand why a consumer should be penalised just because they want to take over their own finances," Mr Baxter said.

The survey results come a day before the publication of a white paper outlining changes to consumer credit rules.

It is expected to make credit deals easier to understand and reduce financial penalties for repaying loans early.